Our Cost Segregation Study Saves You THOUSANDS!

What is a Cost Segregation Study?


Here is Mike Aversano CPA, explaining how a cost segregation study can benefit you!

 

A cost segregation study is a tax planning strategy that allows commercial property owners and real estate investors to accelerate depreciation deductions and reduce their current tax liability.


Here's how it works:


The Basic Concept When you buy or construct a commercial building, the IRS normally requires you to depreciate it over 27.5 years (residential) or 39 years (commercial). However, many components of that property can actually be depreciated much faster - over 5, 7, or 15 years.


What the Study Does A cost segregation study involves having engineers and tax professionals analyze your property to identify and reclassify components that qualify for shorter depreciation periods.


See below for all of the benefits!


Benefits:


  • Accelerated depreciation deductions - You can claim significantly larger depreciation deductions in the early years of property ownership, moving expenses from future years into the present


  • Immediate tax savings - The increased depreciation reduces your taxable income, which means lower tax bills in the current and near-term years. This puts cash back in your pocket sooner


  • Improved cash flow - The tax savings create additional working capital that you can reinvest in your business, pay down debt, or use for other investments


  • Time value of money advantage - Getting tax deductions now rather than spread over 39 years means you benefit from those dollars today when they're worth more.


  • Retroactive application - If you didn't do a study when you bought the property, you can still perform one now and "catch up" on missed depreciation from prior years without having to amend returns, using IRS Form 3115


  • Reduced taxable gain on sale - Since you've already taken more depreciation, your adjusted basis is lower, but you can use 1031 exchanges or other strategies to manage this


  • Increased ROI - The tax savings improve your overall return on investment for the property


  • Audit support - A professionally prepared study provides detailed documentation that the IRS respects, reducing audit risk compared to making your own allocations


  • Better financial planning - Understanding your property's true component breakdown helps with long-term tax planning and budgeting for repairs and replacements



If you want to take advantage of all possible benefits, Contact us now!

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