Loading...
Cost Segregation began in the early 1980’s and is an established IRS tax law accelerating depreciation for for-profit commercial property. Because the benefit of cost segregation can be significant in amount of tax savings, savvy, knowledgeable real property owners utilize cost segregation as a routine step in the process of preparing their income tax returns. With the popularity of cost segregation, many commercial property owners are unclear about how cost segregation fits into tax law. A fully engineered study works for older or newly constructed properties but is most efficient for new buildings projects while they are still in the design stage or under construction.
Existing commercial property owners are often overlooked as we can “look back” and catch up all remaining depreciation without amending the tax return.
Cost segregation has evolved from years of litigation and rulings rather than from a Code section or succinct ruling, the legal basis underlying cost segregation can be confusing. A common perception is that cost segregation is a method that is an elective provision that the IRS considers to be an aggressive filing position. This perception sometimes causes real property owners to avoid cost segregation and, in turn, miss out on benefits that can be substantial.
Our fully engineering approach to cost segregation analysis is unique in the industry. Using a customized engineering software built for our customers’ needs, we are able to utilize other often unused tax laws due to the software’s ability to perform this to our exact instructions. We also plan to inspect all subject properties to secure photographs documenting those components that qualify for accelerated depreciation. Our studies reconcile ALL project costs, and include a complete analysis of all property components, including 39-year assets. This detail allows owners to take advantage of future write-offs with this comprehensive management tool allowing a simple reference to retire asset components on demand.
“The preparation of accelerated depreciation studies requires knowledge of both the construction process and the tax law involving property classifications for depreciation purposes.”
A “fully-engineered” study that allows building owners to write off their building (new & existing) in the shortest amount of time permissible and the depreciation is brought forward.
These savings hidden in the walls, floors, ceilings, breakers, wires and even the landscape outside are reclassified by breaking down the components of the building These items depreciate at different rates. Through this differential, commercial property owners or lessees can increase cash flow and receive additional tax deductions.
Our cost segregation process utilizes customized software and a fully-engineering approach to identifying assets in a building that can be reclassified into a much shorter depreciable life. Our Cost Segregation team has a unique blend of knowledge in engineering, construction, architecture, tax, and accounting. A quality Cost Segregation Study evaluates all available information on the property and presents the findings in a clear, well documented format.
Taxpayers saw their normal deductions on property reduced significantly. It was around that time the Big Four Accounting firms began to pioneer cost segregation in its current form and started recommending it to their larger clients. The idea was simple. All buildings contain components and fixtures necessary for taxpayers to run their businesses. Today, accelerated depreciation is utilized effectively for all types of industries and smaller properties.
|
Medical facility
|
|
tax savings
$1,700,000
|
|
|
Corporate HQ
|
|
tax savings
$459,140
|
|
|
Typical Convenience Store
|
|
tax savings
$2,874,409
|