Cost Segregation is the IRS guidelined method of re-classifying components and improvements of a commercial building resulting in a reduced income tax liability and an increased cash flow. Cost Segregation is applicable to both owners and lessees.
- Mitigate income taxes otherwise due on the above related income
- Give you the ability to accelerate depreciation deductions immediately
- Break down your building into the nine subsystems required to be compliant
with the new IRS regulations
A cost segregation study will:
as a result of the new IRS regulations
New Section 263 Regs
New regulations may require you to capitalize ordinary repair and maintenance expenses. They may also require that you include previously deducted repair and maintenance expenses in your current year income.
- IRS guidelined, third party, engineered study identifies, separates and values 5, 7 and 15 year, depreciable life personal property from 39 or 27.5 year. The net result is a significant acceleration of available income tax deductions.
- IRS allows this technique to be applied to newly constructed and existing buildings placed in service no earlier than 1987. Additionally, cost segregation studies may be completed solely on tenant improvements. It probably doesn’t make sense for a building owned longer than 12 years unless significant remodeling has occurred.
- Cost segregation has been used since 1997 as a result of two landmark tax court cases; Walgreen’s and Hospital Corporation of America. Big 4 CPA firms with engineering departments have used cost segregation for their large clients. Cost Segregation Initiaves now cost effectively delivers this service to the middle and smaller markets.
- IRS suggests studies utilizing an engineering methodology be performed to maximize benefits and assure guidelines are followed. It’s unlikely that your tax professional reads and interprets blueprints.
- Cost segregation will benefit owners of all types of commercial property, however properties with higher level improvements and more specialized uses will consistently yield the highest benefits. Net tax benefits are typically range from 10 to 30 times the net cost of the study.
- We complete a no cost review usually within 15% of the results of a fully engineered study. Our client will always be presented with a fixed, flat fee bid prior to engagement. This fee is based on size and complexity of the property. The fee is payable, 50% upon engagement and 50% at the time the study is delivered, usually about six weeks later.
- Auto Dealerships
- Apartments / Multi-Family
- Fast Food / Franchise
- Medical Office Building
- Office Buildings (Owner)
- Retail / Mixed Use
- Senior Living (Independent/Assisted Living)
- Shopping Centers
- Tenant Improvements