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The value of cost segregation for manufacturing facilities
By Israel Segal
Manufacturing facilities can reduce their taxes significantly through a process called cost segregation. According to federal tax laws, cost segregation consists of identifying personal property assets that are grouped with real property assets, then separating the personal assets for tax reporting purposes. Doing this requires an experienced engineer with a well-rounded understanding of construction finance who can produce a cost segregation analysis that identifies and classifies personal property assets. Personal property consists of a building’s non-structural elements, exterior land improvements and indirect construction costs.
The engineer must examine blueprints, architectural drawings and electrical plans and isolate structural and mechanical components from those that are considered personal property. The cost segregation report will also identify architectural and engineering fees that can be segregated.

The larger tax deductions will result in increased cash flow and a lower cost of capital, especially during the first few years following an expansion project, renovation or purchase. A cost segregation study can help identify opportunities for such periods of accelerated depreciation.
In order for manufacturing facilities to take full advantage of cost segregation opportunities, buildings must have been purchased, constructed, renovated or expanded after 1987. While cost segregation is most cost-effective for such buildings, a well done study can uncover tax deductions for buildings that predate 1987. Buildings best suited for cost segregation will have a cost basis greater than $500,000.

1st Paragraph

Manufacturing facilities can reduce their taxes significantly through a process called cost segregation.

Verb: can
Adjective: their, cost
Adverb: significantly

Cost segregation consists of identifying personal property assets that are grouped with real property assets

Verb: Identifying
Noun: are
Adjective: real

Personal property consists of a building’s non-structural elements, exterior land improvements and indirect construction costs.

Noun: property
Verb: Consist
Adjective: structural

2nd. Paragraph

The larger tax deductions will result in increased cash flow and a lower cost of capital.

Adjective: larger
Verb; tax
Noun: deductions

A cost segregation study can help identify opportunities for such periods of accelerated depreciation.

Noun: opportunities
Preposition: for
Verb: accelerated

Buildings best suited for cost segregation will have a cost basis greater than $500,000.

Noun: Buildings
Verb: cost, hav