If you’ve recently purchased or improved a commercial property, you may be sitting on untapped tax savings. The key to unlocking those savings? Cost segregation, specifically the kind that’s powered by engineering expertise.
While both engineering-based and accounting-based cost segregation aim to accelerate depreciation and improve cash flow, only one delivers comprehensive results with the accuracy and depth the IRS expects.
What Is Cost Segregation?
Cost segregation is a tax strategy that separates personal property components from real property in a commercial building. Instead of depreciating everything over the standard 39 years, qualifying components, like cabling, lighting, and specialty systems, can be depreciated over 5, 7, or 15 years, significantly accelerating deductions.
But not all cost segregation studies are created equal.
The Difference: Engineering-Based vs. Accounting-Based
Most accounting-based studies rely on broad estimates and “rule of thumb” to assign costs to certain building components. While faster and cheaper upfront, these studies often miss key savings opportunities and may lack the detailed documentation the IRS wants to see.
In contrast, engineering-based cost segregation, like the studies delivered through NetTax's alliance partner, Empower Solutions, takes a much deeper dive. Here’s why that matters.
Deeper Asset Discovery = More Deductions
Engineering-based cost segregation studies take a much closer look at the mechanical, electrical, and specialty systems within your building. Instead of simply estimating or generalizing, engineers assess how each component serves your business operations. This allows them to identify personal property that qualifies shorter depreciation schedules, rather than treating everything as long-life real property.
Trusted, Transparent, & IRS-Compliant
The depth and accuracy of engineering-based studies also provide unmatched transparency. Every report includes clear documentation and direct references to IRS guidelines (such as Revenue Procedure 2007-16) that support the reclassification of property. During construction or renovation, engineers often conduct mid-project inspections to verify attachment methods and accurately document each component’s function and classification.
With thorough appraisals, valuation techniques grounded in engineering analysis, and comprehensive final reports, you get a study that stands up to scrutiny. In contrast, accounting-based cost segregation tends to rely on high-level estimates and generalized assumptions, lacking the detailed substantiation the IRS prefers, and that you deserve.
Better Results During Design & Construction
When engineers are brought in during the planning or remodeling phase, they can influence design choices to maximize qualifying property, without compromising the project’s integrity. That’s a savings opportunity accounting-focused teams just can’t offer.
Real Tax Expertise Meets Real Engineering Insight
Engineering-based studies don’t just follow the rules, they apply them strategically. Our professionals understand both the technical complexity of building systems and the nuances of tax code, ensuring nothing is left on the table.
You Keep More of What You Earn
Ultimately, the biggest reason to choose engineering-based cost segregation is simple: you’ll keep more of your money and pay less to the IRS.
Stop Leaving Money on the Table
If you’ve acquired or upgraded a commercial property in the last five years, there’s a good chance you’re overpaying on your taxes. NetTax and Empower Solutions can help you reclaim those dollars with a smarter, engineering-driven approach that delivers real results. To see how much you could save, reach out to our team today.