Can a Business Deduct Part of Its Building for Tax Purposes?

The short answer is YES! Commercial buildings and their components are usually considered assets with a 39-year life for tax depreciation purposes. This means that the building is very slowly depreciated over a 39-year period. However, through the use of a Cost Segregation Study, a business can reclassify many of the components of its building as personal property with a tax life of 5, 7 or 15 years.

When is the deduction allowed?

Property classified as 5, 7 or 15 year property qualifies for bonus depreciation, which means that the tax deduction can be taken in the year that the building is either purchased, built, or renovated. Also, through the use of a Cost Segregation Study, a company can “look back” to a building placed in service in prior years and take bonus depreciation on the shorter lived components in the year of the study. No amended returns need to be filed.

Please join Susan Roberts and Mark Colvin as they discuss this and other tax benefits that a company can capitalize on through fixed asset studies in this video.