First, let’s briefly cover the definition of Cost Segregation. Cost Segregation is a tax saving strategy which enables individuals and companies who have purchased, expanded or remodeled real estate in an effort to increase cash flow by speeding up deductions or depreciation and deferring state and federal income taxes.
In a cost segregation study, certain costs previously classified as subject to 39-year depreciable life, can instead be classified as personal property or land improvements, with a 5, 7, or 15-year rate of depreciation using accelerated methods. Essentially the depreciation of specific assets is taken at a faster rate than if no cost segregation study was performed. If you are a commercial building owner an engineering-based study allows you to depreciate a new or existing structure in the shortest amount of time permissible under current tax laws.
What are the general benefits of a cost segregation study?
The benefits of a cost segregation study include:
- An immediate increase in cash flow
- A reduction in current tax liability
- The deferral of taxes
- The ability to reclaim often missed depreciation deductions from prior years (without amending your tax returns)
A cost segregation study is one of the most valuable tax strategies available to commercial real estate owners. This increasingly popular strategy offers facility owners the opportunity to defer taxes, reduce their overall current tax burden, and free up capital by improving their current cash flow. Virtually every taxpayer who owns, constructs, renovates, or acquires a commercial real estate structure has the potential to benefit from a cost segregation study.
To learn more about how you can benefit from a cost segregation study and to see if you are eligible contact Prime Tax Group LLC for a no cost evaluation.