The Benefits of Cost Segregation – Increased Cash Flow and Tax Deductions!
Cost Segregation is the process of segregating the costs associated with the specific commercial real property investments in real estate. Commercial real property is depreciated over 39 years (or 27.5 years for commercial residential).
In order to qualify for Cost Segregation, properties must have been constructed, acquired, or renovated after 1986, under the IRS guidelines. The property can be a new building under construction; existing buildings undergoing remodeling, restoration or expansion; purchases of existing property constructed anytime, but placed in service after 1986; office/facility leasehold improvements on your current facility and “fit outs”.
What are the Benefits of Cost Segregation?
With the benefit of properly segregating costs, business owners, investors, and developers can accomplish several goals related to real estate properties:
1. CASH FLOW – A significantly improved after tax cash flows from the project due to accelerated tax depreciation.
2. TAX DEDUCTIONS – Opportunity to claim “catch-up” depreciation on future tax returns for corrections in tax depreciation.
A Cost Segregation Study should never “estimate” or “assume” what the percentage of the basis of your reclassification of property might be. An experienced, competent firm will perform the highly-detailed work that is absolutely necessary to provide you with the highest level of tax savings you have a right to and deserve. The Study’s report must be completed with real, measured information, gathered by professionals who know from experience what a successful submission to the IRS requires.
The Business Wealth Preservation Group, LLC can recommend a preferred provider that can perform a no cost initial cost segregation analysis, and if it makes sense, perform a complete cost segregation study. We strongly recommend you call us if you have questions.