cost segregation

Could a Cost Segregation Study Help You Accelerate Depreciation Deductions?

Businesses that acquire, construct or substantially improve a building — or did so in previous years — should consider a cost segregation study. It may allow you to accelerate depreciation deductions, thus reducing taxes and boosting cash flow. And the potential benefits are now even greater due to enhancements to certain depreciation-related breaks under the Tax Cuts and Jobs Act (TCJA).

Real property vs. tangible personal property

IRS rules generally allow you to depreciate commercial buildings over 39 years (27½ years for residential properties). Most times, you’ll depreciate a building’s structural components — such as walls, windows, HVAC systems, elevators, plumbing and wiring — along with the building. Personal property — such as equipment, machinery, furniture and fixtures — is eligible for accelerated depreciation, usually over five or seven years. And land improvements — fences, outdoor lighting and parking lots, for example — are depreciable over 15 years.

Too often, businesses allocate all or most of a building’s acquisition or construction costs to […]

By |October 3rd, 2018|cost segregation, deductions, depreciation, New Tax Laws|0 Comments

6 Key Factors to Consider When Evaluating a Property for Cost Segregation

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As the real estate market continues to rise, property owners are seeing the need to become more educated on ways to reduce their costs. Knowing that real estate is one of the only investments in the United States that can be depreciated (cost recovery), it comes as a no-brainer that property investors are utilizing the benefits of the tax code via cost segregation in order to maximize their cost recovery!

The IRS allows the separation of building components so that items such as land improvements and personal property can be separately depreciated over the shorter recover periods. A property’s structure is generally subject to a 39-year recovery period (non-residential) and 27.5-year for residential, while land improvements qualify for a 15-year recovery period and personal property qualifies for a 5-year recovery period. As a property investor, let’s say you installed new flooring throughout your building. Every year, you can write that flooring off on your taxes until the end of its useful life. That period of time that the asset depreciates is considered the recovery period and the shorter the recovery period, the greater the reduction […]

By |February 3rd, 2017|cost segregation|0 Comments

Understanding the Value of Next-Gen Cost Segregation Studies

Cost segregation studies involve identifying personal property assets  with shorter tax depreciation lives (i.e. 5 or 7 years) that have been grouped with real property assets (typically 39 year) and separating these out for tax depreciation purposes in order to accelerate depreciation deductions. The thought of cost segregation for real estate can be an overwhelming concept for most taxpayers, but thanks to the newly revised tangible property regulations that were passed in 2014, these next-generation cost segregation studies have become an even more powerful tool for real  property owners. These detailed studies allow us to reduce tax liabilities for our clients and in turn, put more dollars back into our clients’ pockets and businesses, further stimulating growth and peace of mind. So while the value of these studies is unmistakably positive, understanding the details of it are a bit more complex. Heidi Henderson from Engineered Tax Services, published a detailed and thorough article on understanding and realizing the value of these next-gen studies. To view the complete article click hereAs a general rule of thumb, if you own real property with a value greater than $750,000, it is very likely that you would […]

By |February 24th, 2015|cost segregation|0 Comments