Cost Segregation
A federal income tax tool that helps owners of business real estate increase cash flow by reallocating property assets into the appropriate tax depreciation categories.
A cost segregation study is a federal income tax tool that helps owners of business real-estate assets increase cash flow by identifying and reallocating property assets into the appropriate tax depreciation categories — thus reducing taxable income and maximizing return on investment. The process separates personal property from real property to shorten depreciable tax life and accelerate depreciation methods.
Cost Segregation, Three Ways
Cost Segregation (CS)
New construction, including renovation, remodeling, expansion, and leasehold improvements.
- Methodology:
- Actual Cost Data, Engineering Analysis
- Documents:
- Contractor Applications, Project Summary
Purchase Price Allocation (PPA)
Acquisition of investments in real estate property.
- Methodology:
- Full Engineering Analysis (Cost Approach), RCLND, Cost Allocation
- Documents:
- Purchase Agreement, Closing Statement, Land Values
Fixed Asset Review (FAA)
Buildings and/or facilities with more than a one-year holding period (Historical Look-Back Study).
- Methodology:
- Revenue Procedure 2008-52, Filing 3115s with the IRS, Code Section 481(a)
- Documents:
- Schedule 4562 (last 5 yrs), M-1 adjustments, tax depreciation records, location codes & square footage
Is Your Property Eligible?
Opportunities exist for newly constructed buildings, newly acquired buildings, buildings constructed or acquired in prior years, and significant remodel, renovation, or expansion activities. In addition, tax credits and deductions related to green and alternative energy improvements may be available.
The Value of Cost Segregation
- For every dollar shifted from 39-year to 5-year property, the present-value tax benefit is approximately 20¢.
- For every dollar shifted from 39-year to 7-year property, the present-value tax benefit is approximately 18¢.
- For every dollar shifted from 39-year to 15-year property, the present-value tax benefit is approximately 11¢.
What Clients Recover
Hotel
- Construction Costs
- $30M
- 1245 Property
- $4.5M
- 1250 Property
- $2M
- Benefit to Taxpayer
- $1M
Manufacturing Facility
- Construction Costs
- $35M
- 1245 Property
- $10.5M
- 1250 Property
- $2M
- Benefit to Taxpayer
- $2.1M
Contact Us Today for a Complimentary Estimate
Leverage the tax code to generate untapped revenue.