Cost Segregation Review
A Valuable Tax Strategy
Cost segregation is an internal tool for commercial property owners providing an immediate increase in cash flow, a reduction in current tax liability, and defers taxes.
A cost segregation study is a detailed investigation of the costs and components of property for both new construction as well as acquired property. The analysis includes the identification and quantification of various components of a building or leasehold improvements to segregate the items and their costs and/or values into various depreciation lives for tax purposes.
Cost Segregation also enables you to reclaim "missed" depreciation deductions from prior years without having to amend tax returns.
In order to realize the maximum depreciation benefits, the IRS requires that engineering-based cost segregation studies be performed that provide more precisely segregated property information, giving CPA's the data and detailed supporting documentation they need to meet with strict IRS regulations and requirements.
For example, A $2,000,000 office building will receive approximately $50,000 of depreciation a year using standard depreciation methods. When a cost segregation study is performed, that same building could receive as much as $110,000 in additional depreciation the first year and over $652,000 in accelerated depreciation in total over the next five years.
Virtually every taxpayer who owns, constructs, renovates, or acquires a commercial real estate structure will ultimately find significant benefit from a Cost Segregation Study.
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You can utilize what is called “cost segregation” for added depreciation write-off’s.
Cost segregation is implemented when you itemize all the items inside your property such as: Carpets, window covers, toilets, central air conditioning, forced air heating, cabinets, plumbing fixtures, light fixtures, plus all electrical wires and plumbing in the walls. Each one of these items has a useful depreciable life and can be depreciated accordingly.
Contact us to see if your building qualifies.