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Cost Segregation
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Our Services
At Parr & Ibarra, we offer a full suite of cost segregation solutions designed to meet the needs of property investors, developers, and business owners. Each engagement is tailored to your property type, tax position, and long-term goals. Here’s what you can expect when working with us:
- Engineering-Based Cost Segregation Studies
- Tax Savings Analysis & Depreciation Schedules
- Fully-Documented IRS-Compliant Reports
- Lookback Studies & Catch-Up Depreciation
- Multi-Property Portfolios
- Strategic Advisory & Ongoing Support
This comprehensive approach ensures that you’re not just reducing taxes in the short term, but building a smarter, more efficient strategy for long-term real estate investment success.
Frequently Asked Questions
Knowledge Center
What is cost segregation and how does it reduce taxes?
Cost segregation is an IRS-approved tax strategy that accelerates depreciation deductions on commercial real estate. Normally, commercial buildings are depreciated over 39 years. A cost segregation study identifies components of the property — flooring, lighting, specialty plumbing, land improvements, and other elements — that qualify for 5, 7, or 15-year depreciation instead. Accelerating those deductions into earlier years reduces taxable income now, improving cash flow and the after-tax return on your real estate investment. For a property purchased for $2M or more, a cost segregation study can generate six figures in additional depreciation deductions in the first year.
What types of properties qualify for cost segregation in Texas?
Most commercial real estate qualifies — including office buildings, retail centers, restaurants, medical facilities, warehouses, industrial properties, hotels, apartment complexes, and mixed-use developments. The strategy is available for newly constructed properties, recently purchased existing properties, and properties that have undergone significant renovation. Texas real estate investors and business owners who own their commercial space are among the most common beneficiaries, particularly given the volume of commercial development across the DFW metroplex in recent years.
How much does a cost segregation study cost, and is it worth it?
Study fees typically range from $5,000 to $15,000 depending on property size and complexity. The return on that investment is evaluated by comparing the fee to the present value of the additional depreciation deductions accelerated. For most commercial properties valued at $500,000 or more, the tax savings generated in the first year alone significantly exceed the cost of the study. We perform a feasibility analysis before recommending a study to ensure the economics make sense for your specific property and tax situation.
Can I do a cost segregation study on a property I purchased years ago?
Yes. A lookback study allows property owners to claim the depreciation they missed in prior years without amending past returns. The catch-up deduction is taken in the current tax year as a one-time adjustment — called a Section 481(a) adjustment — and can generate a substantial deduction even on a property owned for many years. If you purchased commercial real estate in the DFW area and have never had a cost segregation study performed, the missed depreciation may be recoverable.
How does bonus depreciation interact with cost segregation?
Bonus depreciation allows qualifying property to be deducted in the year it is placed in service rather than over its useful life. When combined with cost segregation — which reclassifies building components into shorter-life categories that qualify for bonus depreciation — the result can be a very large first-year deduction. Bonus depreciation has been phasing down from 100% (available through 2022) and the current percentage depends on the tax year in question. We model the interaction between cost segregation and bonus depreciation as part of every study to maximize the timing and magnitude of your deductions.
More FAQs here.
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