Most of the cost segregation studies that cross my desk are lookback studies, where the property owner and CPA have realized long after the building was put into service that cost segregation could be effectively applied to the building. Although lookback studies are beneficial, the optimum time to apply cost segregation is as soon as one of these trigger events occurs, so accelerated depreciation occurs immediately rather than catching up later. 6 events that create the opportunity to apply cost segregation or tax deferral: 1) New construction. Many CPAs I’ve talked with think this is the only time that cost segregation can be applied. This is incorrect, but it is the best time since no accelerated depreciation will be deferred and there will be no catching-up to do. 2) Purchase. Whenever a commercial or multi-family residential building is purchased, cost segregation should be considered as a tax deferral strategy. 3) Acquisition via exchange. When a building is acquired via a tax deferred exchange, and if there is an amount paid over and above the exchanged basis of the relinquished property, then the incremental cost basis above the exchange basis amount may be cost segregated. It is not advisable to cost segregate the exchange basis itself. See my post on cost segregation and exchanges for more on that. 4) Renovation or expansion. Improvements of $500,000 to $1 million or more or can be good candidates for cost segregation. 5) Leasehold improvements. If a landlord pays for tenant improvements, or if a tenant pays for them, someone has an investment that may be a good target of opportunity for tax deferral. Tenant improvements, whether part of a study performed on an entire building, or as the entire subject of a study, can be cost segregated with rewarding results. See my post on tenant improvements for more. 6) Step up in basis. If a partner is bought out or a co-owner passes away, there may be a significant dollar amount in stepped-up building basis. When this occurs it can trigger a cost segregation opportunity if it is on the books as a 27.5 year or 39 year asset. If you have let any of these trigger events slip by, don’t despair. It may not be too late to take advantage of the tax deferral option available via cost segregation. Other than new construction, all of these scenarios can be dealt with effectively via a lookback study.