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Cost segregation

Federal Tax Reduction - Overview

Cost Segregation Reduces and Defers Income Taxes

Cost segregation studies conducted by the nation-wide leader O'Connor & Associates exceed the IRS standards for a quality study to reduce federal income taxes and pass IRS audits.  Working with your CPA, our cost segregation study will reduce your federal income taxes.  We can conduct a cost segregation study within weeks of being engaged, or provide a comprehensive preliminary estimate of tax benefit within 24 hours, allowing you to assess the potential tax benefit and decide if cost segregation will help you reduce your income tax burden and increase cash flow. Our estimate of potential tax savings may be the deciding factor for delaying your filing.

It is this simple: if you own commercial real estate and are not using cost segregation, you are paying too much in federal income taxes. 



Owners of commercial and multifamily real estate reduce federal income by using cost segregation to correctly calculating real estate depreciation. Increasing depreciation improves the tax benefits of commercial and multi-family properties by affecting tax reduction and deferring the payment of federal income taxes.

Click here for a complete list of Tax Reduction Services

Range on Year 1 Tax Savings
(100,000-500,000 sq. ft. property size)

$35,500 - $160,000
$19,240 - $96,200
$36,500 - $182,600
$10,800 - $54,000

Typical first year tax savings are 4:1 to 50:1.

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Cost Segregation
Tax Cutting Tips!

IRS Guided.
Cost segregation is a conservative, IRS-defined approach implemented by our professional real estate appraisers to update depreciation schedules for commercial properties and correct component allocation, ultimately reducing your federal incomes taxes. Utilizing appraisers allows O’Connor & Associates to offer considerable cost efficiencies to this process. Our fees are typically one-half those charged by non-appraisal firms for comparable commercial properties.

Clients have saved over $100 million as a result of cost segregation studies prepared by our appraisers. We use IRS guided process for gathering data, calculating the market value of components which can be segregated and compiling results into a report. After performing thousands of reports, our results have not been revised in the handful of related audits.

Effective. Cost segregation is the most accurate way to depreciate improved commercial property acquired or built after 1986 and one of the more effective methods to reduce federal income taxes. When using this approach for federal tax reporting, the depreciation of certain commercial property improvements and components may be reflected in shorter-life recovery periods. Depreciation is the primary non-cash tax deduction. Net income is significantly affected by reducing federal taxes when selected improvements are depreciated over 5, 7 or 15 years, rather than 39 years for commercial property and 27.5 years for apartments. Reducing the depreciation life for components increases annual depreciation, and effects reduction in federal income taxes.

Catch-Up Depreciation. Cost segregation allows you to "catch-up" previously under-reported depreciation without filing any amended tax returns. All "catch-up" depreciation can be utilized in the tax return filed after obtaining a cost segregation study, without filing any amended tax returns.  There is a myth that “catch-up” depreciation triggers audits; this has not been our experience based on thousands of engagements.

Affordable. O’Connor & Associates pioneered the use of real estate appraisal specialists to value eligible commercial property components according to the IRS Cost Segregation Audit Techniques Guide. Using standard accepted methodologies, our appraisers’ analytical and time efficiencies translate to cost effective fees for the resulting report.

Our modest fees magnify the year-one payback ratio and make cost segregation cost effective for more owners. Year-one income tax savings from cost segregation are almost always at least two to four times our fee. In come cases (for owners who have owned property for over 10 years), year-one savings were more than 100 times our fee.

Our low price point opened the door to a higher level of tax deductions for commercial properties with as little as $500,000 in building improvements.

Accountant Friendly. Most importantly, our advisors and appraisers interact with the client’s accountant or tax advisor throughout the process. By partnering with the accounting profession, we apply cost segregation to a breadth of applications for tax savings on commercial property, even when REITs, partnerships, corporations or 1031 Exchanges are involved. Owners of older commercial properties can report prior years’ non-depreciated components and realize a significant reduction in taxes, without filing an amended return.

O’Connor & Associates has experienced state-licensed appraisers who have performed cost segregation studies for thousands of commercial properties across the nation. We can prepare a thorough report to document the total amount of depreciation you are entitled to report to the IRS (5, 7, 15, 27.5, 39-year commercial property) as well as the land value. Your CPA will welcome the backup documentation!

Utilizing a cost segregation study saves federal income taxes immediately and in the future. Let O’Connor & Associates conduct a cost segregation study on your commercial property for a nominal flat fee. Typical first year tax savings are 4:1 to 50:1. You can achieve substantial results with minimal risk.

Tax Reduction and Related Services

Other Real Estate Consulting Services

Cost segregation studies are beneficial in all geographic markets and in a wide range of property and business types.

Nationwide in dozens of cities including:

  • Atlanta, GA
  • Baltimore, MD
  • Boston, MA
  • Bridgeport, CT
  • Chicago, IL
  • Dallas/Ft. Worth, TX
  • Denver, CO
  • Hartford, CT
  • Houston, TX
  • Las Vegas, NV
  • Los Angeles, CA
  • Memphis, TN
  • Miami, FL
  • New Orleans, LA
  • New York, NY
  • Orlando, FL
  • Philadelphia, PA
  • Phoenix, AZ
  • San Diego, CA
  • San Francisco, CA
  • Seattle, WA
  • Tampa, FL
  • Washington, DC
Property/Building types including:
  • Apartments/Multifamily
  • Free Standing Retail Stores
  • Hospitals
  • Hotel/Motel
  • Industrial
  • Manufacturing
  • Medical
  • Office
  • Recreational/Entertainment
  • Restaurants
  • Self-Storage
  • Shopping Malls
  • Shopping Plazas
  • Warehouse/Distribution

Request a FREE analysis of potential income tax savings!
Or, call Roger Hibbs at 1-877-375-4291.

Corporate Office
2200 North Loop West, Suite 200
Houston, TX 77018
driving directions to all locations
(t) 713.686.9955 / 1.800.856.REAL
(f) 713.686.3377
For general questions not related to property tax, e-mail us.
For property tax questions e-mail the Property Tax Department.
Office Locations
Houston, TX (corporate)
Dallas, TX
San Antonio, TX
Austin, TX
Los Angeles, CA
Services: Cost Segregation | Property Tax | Appraisals | Research & Consulting
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