Cost Segregation Studies

In this solocast, episode of the Progressive Dentist Podcast, I thought it would be helpful to talk about cost segregation studies. I discuss cost segregation studies in relation to the building you own, and I explain how you can leverage cost segregation studies to lower your tax bill. By using this strategy, you can leverage your building to keep more of what you make.

If You Own the Building in Which You Operate Your Practice…

For any listeners who own or plan to own the building in which they operate their practice–it is important to note that commercial buildings are typically depreciated over 39 years. That number will help you calculate your deduction every year. When you perform a cost segregation study, the building is broken into sections titled: 39-year property, 15-year property, or 5-year property. That means the percentage of depreciation changes for each section, which drastically increases your tax savings.

It’s Never Too Late to Do a Cost Segregation Study

Even if you purchased the building four years ago, you could make up the lost depreciation the year you do the study. It is never too late, and the study only costs around $5,000. That may seem like a lot, but it is minimal in comparison to the $50,000-$75,000 that my clients have seen in tax savings. The other beauty is that you can leverage your cost segregation study to help with the cost of renovation. After you purchase a new building and renovate it, this process enables you to write off part of the demolition. The stuff that you pulled out has value, and you can write it off in addition to the other deductions.

Many of my clients are hesitant to do a cost segregation study when they already show a loss on their building. They aren’t making enough profit on the building and assume they can’t write it off. However, you can make an election that allows you to treat your dental practice and your building as one economic unit for tax purposes. That enables you to pin the loss of your building against the profit of your practice and take advantage of the cost segregation study for extensive savings.

Put it in Your Back Pocket

Planning is important and most firms will do an analysis to predict your savings before you ever give them money. Cost segregation studies are good to keep in the back pocket because you can use them strategically to offset large equipment purchases or construction projects. We are in peak tax planning season right now, so make sure to sit down and have this conversation with your CPA. Click here to listen to the episode and hear all of the top tips from our other podcast episodes in one place. Please visit me at for more informative, money-saving podcast episodes like this one.

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