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Cost Segregation Studies

If you have recently purchased or built investment property, you may have the opportunity to save significant tax dollars by conducting a cost segregation study.

Cost segregation is the process of separating the costs of tangible personal property, other tangible property, indirect costs and land improvements from building and improvement costs.

Under current tax law, the depreciable life of a commercial building is 39 years, and 27.5 years for residential real estate. A cost segregation study allows taxpayers to reclassify different components of the total building cost to shorter depreciable lives, such as 15 years for land improvements, 7 years for furniture and fixtures, and 5 years for machinery and equipment.

By having us perform a cost segregation study for you, you can receive meaningful federal, state and local tax savings. This is accomplished by accelerating your income tax depreciation deductions which will provide you with maximum cash flow.

Overview of our Service to You

1. Educate your personnel about this study process and types of assets that may qualify for a faster depreciable life. We are skilled in presenting complex rules & regulations to non-tax personnel in a manner that helps them understand how the process works.

2. Investigate the costs of the various building components that may qualify for shorter-lived property. In situations where the actual costs cannot be obtained, estimated costs will be generated via the various construction drawings.

3. Research and document the actual items eligible for faster depreciation. This is the step where our tax-oriented approach pays the greatest dividends. The expertise of our tax-oriented approach enables us to identify the components of the building that are eligible for faster depreciation. This process goes far beyond the capabilities of engineering or tax-oriented studies alone. We are able to combine both engineering and tax-oriented studies to obtain maximum benefits for you.

4. Calculate the benefit. This step is not always as straightforward as it first appears. The tax laws are ever changing and significant recent changes have impacted the types of items that qualify for faster depreciation. These changes also impact the amount of soft costs, such as engineering and architect fees, that get allocated to shorter-lived assets.

5. Summarize our findings and supply the justification for our classification to withstand the scrutiny of IRS audits. We will also recommend depreciation policies which could be used on a prospective basis to maximize depreciation.

The above steps will result in greater additional cash flow generated by depreciating the building in the fastest possible manner.

We have been able to provide our clients significant tax savings and we look forward to doing the same for you. Please contact us for a complimentary cost segregation analysis of your property.