A short planning note on why depreciation recapture is real but should be compared against current savings, hold period, replacements, and reinvestment use.
Recapture is not the whole answer
Owners often hear that cost segregation should be avoided because depreciation may be recaptured at sale. Recapture is a real tax issue. But using that word as the entire analysis can cause owners to leave usable current cash flow trapped inside the building.
The right question is more specific: what is the value of taking deductions now, at this owner's bracket, compared with the expected recapture exposure later?
What belongs in the model
- Current tax bracket and usable income
- Amount of 5, 7, and 15-year property identified by the study
- Expected hold period
- Whether accelerated components may be replaced before sale
- Whether the owner plans to reinvest the tax savings
- Disposition strategy and likely recapture profile
Why timing matters
A dollar of deduction today is worth more than a dollar of deduction decades from now. If tax savings are reinvested, the compounding return can change the decision. If the owner expects a short hold, the recapture model matters even more.
JPOPE planning lens
Cost segregation should not be accepted because a headline savings number looks large, and it should not be rejected because recapture sounds intimidating. Model the taxpayer, then decide.