Can I benefit from a study once a property is sold?
Yes. One of the potential benefits of cost segregation is the conversion of ordinary income into capital gains. If a cost segregation study is done after a recent sale, personal property and land improvements can be depreciation at a higher rate with resulting tax savings.
For example, assume $100,000 of increased depreciation is obtained and the personal property tax rate is 35%. Then ordinary taxes will be decreased by 35% of $100,000 or $35,000. Long term capital gains are generally taxed at a rate of 15%. Then 15% of $100,000 is $15,000. This is a net saving of for the property owner of $20,000.
