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Updated almost 2 years ago,
What happens after the period of cost segregation study completes?
Hey folks,
I have a fun question on cost segregation study, around which I am trying to build a house hack thesis.
Scenario
Lets say, we have a $1M property ==> Building cost : $800k, land cost : $200k
Now we do a cost segregation study, with following outcome
- $100,000 of interior fixtures and finishes that can be depreciated over 5 years
- $100,000 of interior fixtures that can be depreciated over 7 years
- $100,000 of land improvements that can be depreciated over 15 years
Using a straight line depreciation on cost segregation data, we get
- Building ($500,000 / 27.5 years): $18k
- 5-year property bucket ($100,000 / 5 years): $20k
- 7-year property bucket ($100,000 / 7 years): $14k
- 15-year property bucket ($100,000 / 15 years): $5k
Total first-year depreciation : $57k
Questions
- Do my 5, 7, 15 year property materials cease to provide depreciation after their relevant cost segregation depreciation period is over? (For example in Year 6, I cannot use any depreciation from 5 year bucket)?
- After year 15, am I just depreciating the building?
- Is the attached screenshot a correct way to understand the cost segregation study?
- Is cost segregation study performed only once in year-1 and its values used over and over until 29.5 yrs OR can I perform the study every year? Does it even make sense to perform every year if there's no material change in artifacts used in 5/7/15 yr buckets?
Many thanks!