Cost Segregation Study

Real property values have sharply rebounded since the downturn that began in 2007, and we are seeing many entrepreneurs making investment in commercial and residential real properties.    A sound entrepreneur would understand the importance of managing cash flow and we like to introduce Cost Segregation Study that can help managing cash tax expense to maximize one’s bottom-line.

Cost Segregation is an analysis performed to identify costs that have been traditionally depreciated over 39 years (in the case of nonresidential commercial real properties) and 27.5 years (in the case of residential real properties) and to reallocate portion of these costs that can be depreciated over much shorter recovery periods (i.e., 5, 7, or 15 years) using accelerated method of depreciation or expensed immediately for tax purposes.  By accelerating tax depreciation, entrepreneurs can defer substantial amount of cash tax liabilities.

Cost Segregation is viable for almost any commercial facilities, including newly acquired or constructed, under construction, inherited or acquired through a 1031 tax-free exchange.  The analysis is used for an immediate increase in cash flow, a reduction in current tax liability, the deferral of taxes, and the ability of reclaim missed depreciation deduction in the past.

The analysis requires knowledge of both the construction process and the tax law involving fixed asset classification and process of adopting and requesting for an accounting method change.

Entrepreneurs in real estate should consider Cost Segregation study to maximize their bottom-line.  The study is performed to claim unclaimed depreciation deductions or accelerate cost recovery by reallocating substantial portion of cost that are being depreciated over 39 years or 27.5 years over much short periods.  Always remember that “a tax deduction today is worth more than a tax deduction tomorrow!”

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