Increase your company’s cash flow with a cost segregation study
If you have:
- A new building under construction
- An existing building undergoing renovation or expansion
- A leasehold improvement or fit out
- A previously owned property that you have acquired
Then your building may be a candidate for a cost segregation study, which can help you save on taxes and improve your company’s cash flow.
Is your building a candidate for a cost segregation study?
A cost segregation study is a comprehensive analysis of constructed or acquired commercial buildings to identify hidden potential for accelerating tax depreciation deductions. Depending on the type of building and special design features, 15 – 50% of costs can generally be reclassified to shorter depreciable lives.
What qualifies for a study?
To be eligible, buildings have to have been purchased, constructed, expanded or remodeled since 1986. To be cost effective, a cost segregation study typically should be conducted on buildings worth $500,000 or more. The most useful studies are on buildings still under construction.
The most common types of buildings:
- Amusement parks
- Apartment complexes
- Automobile dealerships
- Dental offices
- Distribution centers
- Fast food restaurants
- Food processing facilities
- Manufacturing plants
- Medical centers
- Nursing homes
- Office buildings
- Retail chains/franchises
- Shopping malls
- Sports stadiums
What are the benefits of a study?
- Depreciation is increased in earlier years, resulting in lower federal and state income tax and an increase in cash flow.
- If you own a building placed in service as long ago as 1986, you can take a catch-up deduction in the current year for all of the depreciation missed in prior years.
- A properly-documented cost segregation generates an audit trail which, if needed, can help resolve IRS queries at an early stage.
The IRS has standards for what constitutes a properly performed and documented cost segregation study, so its important to work with someone who can provide an acceptable study using the appropriate methodology which maximizes the benefits to you.
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