Cost segregation is an IRS-defined approach to depreciating commercial properties in order to reduce federal income taxes. It works by separating short-life items from long-life items, which allows for doubling or tripling the amount of depreciation taken in the first five years of ownership. This conversion of ordinary income to capital gains and increased early depreciation results in both immediate tax reductions and the deferral of future taxes. Cost segregation studies can benefit commercial property owners with at least $500,000 in depreciable basis who have substantial taxable income to offset.