What is Cost Segregation?
Cost segregation is a U.S. Treasury endorsed, IRS approved tax saving strategy for owners of commercial property. It is a process of identifying and separating personal property from real property. Personal property assets would include items that are non-structural such as qualified floor coverings like carpeting, wall coverings like wall paper, electrical and plumbing dedicated to specialty equipment, light fixtures and millwork that are decorative in nature, even outside landscaping.
Owning commercial real estate represents an enormous upfront investment. Cost segregation allows you to strategically defer taxes and capitalize on the time value of your money. By identifying and reclassifying personal from real property, significant portions of building costs can be depreciated in as few as 5, 7, and 15 years rather than 27.5 years for residential property or 39 years for commercial.
The pie chart below shows an example of a few commercial property assets (business or residential) that can be re-classified to shorter class lives. The red and blue portions of the chart represent building assets reclassified from, much longer, 27.5 or 39 year to, much shorter, 5,7, and 15 year property.
By not utilizing cost segregation on your commercial property, you are basically giving the government an interest free loan of money you could be using today to pay down debt, purchase more property, or remodel your current property. Cost segregation allows for huge depreciation deductions in the earlier years of ownership when you need them the most. By doing so, you experience permanent financial and tax benefits.
Our engineered-based cost segregation studies identify and reclassify all construction costs that qualify for shorter, federal tax lives in accordance with the Tax Reform Act of 1986 (TRA 86) and the Revenue Reconciliation Act of 1993. Construction costs that can be classified as tangible personal property, including land improvements, often yield 20-50% of accelerated depreciation expense deductions. Cost Segregation services makes for faster depreciation which translates into significant tax savings and cash flow benefits.
Check out our new videos explaining cost segregation
Who is Eligible for Cost Segregation?
Commercial property owners who have purchased, constructed, renovated, remodeled, restored, or expanded their property since 1987 may qualify for cost segregation. In order for the study to be cost effective, the purchase or remodel cost of the property should exceed $200,000. Below is a list of properties that would benefit greatly from cost segregation:
Apartment Buildings - Assisted Living Facilities - Auto Dealerships - Banks - Car Washes - Casinos - Convenience Stores - Fitness Centers - Gas Stations - Grocery Stores - Golf Courses - Hospitals - Hotels/Motels - Industrial Warehouses - Manufacturing Facilities - Medical Clinics - Nursing Homes - Office Buildings - Rental Properties - Restaurants (QSR, Sit-down, Sports Bars, etc. ) - Retail -Centers - Self Storage Facilities - Strip Malls - Warehouses
Tax Saving Benefits from Cost Segregation Include:
- Permanent Financial Benefits (cash flow)
- Capitalizing on the Time Value of Money
- Large Income Tax Deferrals (Federal & State) by Reallocating or Reclassifying Qualifying Assets from Longer Life to Shorter Life Property
- Substantial Catch-Up Depreciation on Older Properties that Qualify
- Independent Verification of Depreciation Schedules by a Dedicated Team of In-House CPAs Well Versed in Cost Segregation Regulations and Revenue Rulings
- Tax-Deductible Cost Segregation Study Fees
- Future Leasehold Improvements and Renovations Will Benefit from Abandonment Rules Supported by the Cost Segregation Study
- Economic Stimulation
- A Happy Property Owner
Our Services Will Provide You:
- Maximized Depreciation and Tax Benefits Through a Detailed Engineering Analysis that Reduces Taxes, Improves Cash Flow, and Increases Profits
- Thorough and Comprehensive Documentation for Section 1245 Property Classifications Identified, Organized in a Clear, Easy-to-Use Format
- Fully Supportable Interpretation of Applicable Tax Laws and Regulations
- Findings that may also be used to Support Valuations Related to Ad Valorem Taxes Assessed on Your Property
- IRS Audit Protection on Your Cost Segregation Study at No Additional Charge
Are You Overpaying Taxes?
Tens of thousands of commercial property owners overpay on their taxes each year simply because they are unaware of this tax strategy! Are you one of these overpaying property owners? Assume that you are overpaying on your taxes. Wouldn't you like to find out what your potential tax savings would be? We can show you for free.
It is important for our country to keep more money in the hands of business owners who know how to handle it. This will stimulate the economy through additional purchases and wise investments. We are passionate about what we do because we provide a way for this to happen. Cost segregation is IRS approved and endorsed by the U.S. Treasury!
Don't assume that your accountant is doing cost segregation for you. We actually do the cost segregation work for several accounting firms nationally. This is not their specialty or focus. Cost segregation requires sound engineering and cost estimating experience. Our full time engineers are in house, never outsourced, so you can be sure the best possible work will be done to capitalize on the many benefits that come through a properly conducted cost segregation study.
National Cost Segregation Specialists, LLC National Headquarters: 2158 North Gilbert Road, Suite 108 Mesa, AZ 85203 Toll Free: 800.610.2774 Office: 480.994.0157 Fax: 480.994.0159
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| Additional Resources | ||
| IRS Audit Techniques Guide | ||
| IRS rules regulating cost segregation | ||
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| Third party opinion on cost segregation | ||
| Jay Soled, JD - Charles Falk, CPA, JD | ||
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