Webinar Replay

Please Click Here to Download Summary Below

Cost Segregation as a Wealth Strategy: Accelerated Depreciation, Cash Flow, and Tax Control

This webinar explained how cost segregation uses an engineering-based component analysis to reclassify portions of a property’s depreciable basis from long lives (typically 39-year nonresidential real property or 27.5-year residential rental) into shorter MACRS lives—commonly 5-year (tangible personal property), 7-year (certain movable assets), and 15-year (land improvements)—to accelerate depreciation, reduce taxable income in earlier years, and improve cash flow.

What cost segregation is (and isn’t)

• What it is: A defensible, engineering-supported allocation of building components (and sometimes equipment/site work) into shorter class lives where supportable.
• What it isn’t: It does not create new basis; it accelerates depreciation of existing depreciable basis.

Class-life framing used in the session

• 39-year “shell” / structural building: core structure and certain integrated systems (foundation, roof, walls, major building systems, etc.).
• 5-year examples discussed: certain interior finishes and non-structural assets (e.g., specific flooring layers/finishes, decorative lighting in some contexts, window treatments, certain appliances/specialty equipment), depending on facts-and-circumstances.
• 7-year examples discussed: often movable assets like furniture and certain equipment (context-dependent).
• 15-year land improvements: paving, sidewalks, landscaping, parking lots, pools, and certain exterior site improvements—classification can be nuanced.

Timing, lifecycle use, and “look-back” studies

• Cost seg may be used for acquisitions, renovations, and new construction, and for subsequent improvements.
• The session emphasized “look-back”/catch-up approaches (generally done via an accounting method change rather than amending multiple prior returns), with benefits typically shrinking over time.

Illustrative examples shared (as presented)

• Car wash: $4.4M depreciable basis; ~ $1M first-year tax savings (driven by equipment-heavy components).
• 211-room hotel: $55M basis; $4.3M first-year tax savings.
• 27-story apartment: savings example discussed; apartments may have a different reclassifiable mix than hotels due to furniture ownership and asset composition.
• Look-back example (older renovation): $1.8M basis; $122K first-year tax savings using a look-back approach.

Bonus depreciation: correction + current fact-check

Key point: The presenter described bonus depreciation as being restored to 100% and made permanent by recent legislation referenced in the session.

External fact-check (primary source):

• IRS Notice 2026-11 (interim guidance on 100% additional first-year depreciation under §168(k) as amended):
  https://www.irs.gov/pub/irs-drop/n-26-11.pdf

Practical takeaway: Cost segregation becomes materially more valuable when short-life components (≤ 20 years) can be immediately expensed under current bonus depreciation rules (subject to eligibility and placed-in-service requirements).

Qualified Improvement Property (QIP)

The webinar described QIP as interior, non-structural improvements to nonresidential real property made after the building is first placed in service, and discussed its interaction with 100% bonus depreciation under the current landscape.

External fact-check (bonus depreciation framework and guidance):

• IRS Notice 2026-11:
  https://www.irs.gov/pub/irs-drop/n-26-11.pdf

“Qualified Production Property (QPP)” (as described in the session)

The webinar discussed “QPP” as a concept for expensing portions of certain U.S.-based production/manufacturing facilities where areas are directly tied to production (excluding offices/parking/sales floors).

Important note: I did not locate a single, clearly labeled IRS primary-source page using the shorthand “QPP” that matches the session’s label. Treat this as “as-presented” terminology and confirm the exact statutory definition/rules with a qualified tax professional before using in client-facing materials.

Section 179D (Energy Efficient Commercial Buildings Deduction)

The presenter positioned §179D as a complementary lever because it can add value on the remaining long-life building components that cost segregation does not accelerate, subject to technical qualification and documentation.

External fact-check (IRS instructions with inflation-adjusted values and rules):

• IRS Instructions for Form 7205 (Energy efficient commercial buildings deduction):
  https://www.irs.gov/instructions/i7205

ITC / Clean Electricity Investment Credit (48E) and related energy incentives

The webinar discussed energy credits commonly used for solar and other clean electricity property, describing:

• a baseline credit often referenced as up to 30% (subject to meeting requirements),
• potential adders such as domestic content and energy community/low-income (eligibility is technical),
• and noted timelines/phaseouts as an important planning consideration.

External fact-check (IRS program page):

• IRS Clean Electricity Investment Credit (48E) page:
  https://www.irs.gov/credits-deductions/clean-electricity-investment-credit

External fact-check (regulatory text):

• eCFR: 26 CFR §1.48E-1:
  https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFRe427f958a26c8f4/section-1.48E-1

Practical decision points and Q&A takeaways (substantive)

• When cost seg may not make sense: very short hold periods (recapture economics), and situations where other programs reduce depreciable basis (e.g., certain credit structures) or where funding does not create depreciable basis (e.g., some grants).
• Recapture / hold-period economics: the session suggested a general 3–4 year break-even heuristic, but emphasized it depends on the project’s facts (how much was accelerated and the taxpayer’s situation).
• Project size: the presenter stated there is no minimum size; smaller projects can still be viable.
• Partial asset disposition (PAD): raised in Q&A; the key idea is the ability (in certain cases) to write off disposed components during renovations/remodels when properly documented and elected.

External fact-check (PAD regulatory starting point):

• eCFR: 26 CFR §1.168(i)-8 (partial dispositions framework):
  https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/section-1.168(i)-8
• Why accelerate depreciation: net present value—cash tax savings today can be reinvested rather than waiting decades to recover the same deductions.

External fact-check source list (URLs written out)

• IRS Notice 2026-11 (100% additional first-year depreciation guidance):
  https://www.irs.gov/pub/irs-drop/n-26-11.pdf
• IRS Instructions for Form 7205 (§179D):
  https://www.irs.gov/instructions/i7205
• IRS Clean Electricity Investment Credit (48E) program page:
  https://www.irs.gov/credits-deductions/clean-electricity-investment-credit
• eCFR regulation: 26 CFR §1.48E-1:
  https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFRe427f958a26c8f4/section-1.48E-1
• eCFR regulation: 26 CFR §1.168(i)-8 (partial dispositions):
  https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/section-1.168(i)-8