This Underutilized Strategy Has Significantly Reduced the Tax Burden for Thousands of Commercial Property Owners. Be the Next to Benefit!
Cost segregation is the Internal Revenue Service approved method of re-classifying components and improvements of your commercial real estate from real property to personal property. This process allows the assets to be depreciated on a 5, 7 or 15-year schedule instead of the traditional 27.5 or 39 year depreciation schedule of real property. The result is that your current taxable income is greatly reduced and your cash flow will increase.
Cost segregation studies deliver immediate tax reductions and can even be done retroactively for properties purchased, constructed or renovated within the past 15 years. They are likely appropriate for any commercial property that meets these criteria and has an original property value of over $750,000.
Typically, between 15 percent and 40 percent of a property’s total cost (excluding land) can be reclassified. Cost segregation effectively shortens the depreciation schedule so property owners see an immediate tax benefit and no longer need to wait the usual 39 years for the same deduction.
The actual cost segregation study must be completed by an engineering firm so it is not something that your current tax professional can complete. Your accountant will simply use the results of the study going forward and will not even need to amend prior year’s returns to recapture savings for you.