Many business owners hear the term “cost segregation” and either dismiss it as too complicated or assume it’s only for massive corporations. In reality, cost segregation is a powerful tax strategy that can put real money back in your pocket — if you know how to use it. Unfortunately, widespread myths prevent owners from claiming benefits they legally deserve. Let’s break down the most common cost segregation myths so you can stop leaving cash on the table.
Cost Segregation Myth: “It’s Only for Large Companies”
One of the biggest misconceptions is that only Fortune 500 companies benefit from cost segregation. In truth, this strategy works for any business that owns commercial property or residential rental real estate. Whether you own a small office building, a warehouse, or even a multi-family unit, cost segregation can accelerate your depreciation deductions and improve your cash flow.
Cost Segregation Myth: “The IRS Will Flag Me”
Some owners avoid cost segregation because they believe it will trigger an audit. This simply isn’t true. Cost segregation is fully recognized by the IRS when done correctly by qualified professionals. The key is proper documentation, detailed engineering-based studies, and compliance with IRS guidelines. When executed correctly, it’s a legitimate — and safe — tax strategy.
“It’s Not Worth the Effort”
Another damaging myth is that the time and money spent on a cost segregation study outweigh the benefits. For most property owners, the savings in the first year alone can far exceed the cost of the study. Accelerating depreciation means more deductions now, freeing up cash you can reinvest into your business or other properties.
“It Only Works for New Properties”
Many believe cost segregation only applies to new construction. In reality, you can apply it to buildings you purchased years ago. Even if you’ve owned the property for a while, a “look-back” study can unlock retroactive tax savings through a catch-up depreciation adjustment — no amended returns required.
The Real Cost of Believing the Myths
Falling for these cost segregation myths could be costing you thousands every year. By separating components of your property into shorter depreciation schedules, you can recover your investment faster and keep more of your money working for you. The earlier you take action, the greater your cash flow advantage.
If you’re unsure whether your property qualifies, now is the time to find out. Delaying only postpones the financial benefits you could be enjoying today.
