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What are the BENEFITS?
 

1. Accelerated (MORE) Depreciation: The report is usually done by a certified, qualified professionals (engineers, architects, tax experts) firm which values buildings and their components according to IRS guidelines.  The components are split out (electrical, plumbing, structural, etc) into different “lives” (who long they are estimated to last per the IRS).  Whilst a commercial building normally has a 39 year life, according to the IRS, its various components have SHORTER lives (5 to 15). Imagine your electrical wiring is worth $150,000, part of the $1,000,000 value of your entire building.  Now, imagine you can spread out the cost of that $150,000 over 7 years ($21,429.57/year) instead of 39 years ($3,846.15/year) as part of the $1M value of your building! That’s a difference of $17,582.42/year! Imagine you had your building for 10 years – that would mean you could write off the difference for those 10 years, now, $111,538.50 (since you already wrote off $38,461 over 10 years).
    
2. Tax Savings & Increased Cash Flow: Imagine your tax bracket was 40%. You go to file your tax return with the new one time depreciation amount from above ($111,538.50). That’s a REAL one time tax savings of $44,615.40 (40% x $111,538.50)!!  Imagine the repairs you could do, the debt you could pay down, or the downpayment you could put on a new property with that!  But having a CSS also PREDEFINES your FUTURE accelerated depreciation as well, thereby REDUCING your overall FUTURE income tax, by these larger annual depreciation amounts!  Capital gains taxes can also be mitigated if your overall ordinary tax bracket is lowered (due to accelerated depreciation). E.g. Someone in the 20% federal capital gains tax bracket with a cap gain of $150K (stocks) may owe $30K in cap gains taxes (20% of $150K). But with extra depreciation, their ordinary bracket drops enough to throw them into a 15% cap gains bucket, thereby saving them 5% on that $150K of cap gains ($7,500). This is to say nothing about Net Investment Tax, which can also be mitigated with accelerated depreciation.
    
3. Bonus Depreciation: If any of your building’s components have useful lives which are LESS than 20 years, you can write value of those components off for the full amount of the value. That includes machinery, equipment, and various improvements to the nonresidential property. That electrical wiring example from earlier, whose value was $150,000 but useful life of only 7 years, imagine you can write that entire $150,000 all off of your tax return! If you’re in the 40% bracket that’s $60,000 of up front income taxes refunded to you by the IRS!  See OBBBA Section below for more info.  

   1. SIDEBAR: Some taxpayers may PREFER to opt out of utilizing bonus depreciation to instead properly time deductions against future higher-income years, to not waste such large BONUS depreciation deductions on years which are already at a tax loss, to avoid state tax implications (some states do not recognize BONUS depreciation), and to avoid having to increase passive activity losses (if an investor is a passive investor and the BONUS depreciation will just go to increasing their passive activity losses). In that situation, proper cost-benefit analyses should be done. Sometimes a taxpayer has an NOL, and that may or may not be created by such BONUS depreciation amounts. If a decision to opt out is made, then the taxpayer must attach a statement to the timely filed tax return which clearly identifies the class of the property they are electing bonus depreciation out for, and that they are making the election under IRC Section 168(k)(7).

   2. Example: Let’s say you purchased a $1 million commercial property. A cost segregation study you commissioned identifies about $300,000 worth of components (carpet, lighting, or landscaping) that qualify for 5-, 7-, or 15-year property classifications. With bonus depreciation, you could deduct that entire $300,000 in the first year.
      Here is a good write up on Bonus Depreciation: https://tax.thomsonreuters.com/en/glossary/bonus-depreciation​
       

4. Maintenance & Replacement Cycles: Many buildings and developments have constant turnover of appliances and components. Keeping good records of such purchases ensures that those replacements are accounted for in your CSS when you do it. Having done a CSS, you will also then know the useful lives of these components to take the proper amount of depreciation.
    
5. LESS IRS Audit Risk: If you have a well-documented CSS, it is more defensible in the event of an audit because it is done (hopefully) by a qualified firm with engineers and tax specialists, according to IRS methodology for valuation. This is absolutely indispensable.