More About Cost Segregation Analysis
Cost segregation analysis is a strategic tax tool that enables businesses that have constructed, purchased, expanded or remodeled to depreciate certain types of property and land improvements over a much quicker life. This accelerates current depreciation deductions and increases after tax cash flow. Cost segregation studies can result in tens of thousands of dollars in tax savings in the first year the study is done. Depending on when a cost segregation study is completed, reduced tax liabilities can continue for many years.
Tax law even allows a real estate owner to go back in time and deduct depreciation that would have been allowed had a cost segregation analysis been performed from the beginning.
This is how cost segregation works. The standard class life for tax purposes for most buildings is 39 years (non-residential real property). Residential real property such as an apartment complex has a 27 ½ year tax life. However, for certain types of property that make up a building (paving, storm sewers, dedicated electrical and plumbing, decorative features, etc.), the class life can be reduced to either 15, 7, or 5 years. This allows you to accelerate the depreciation deductions for these types of property, thereby increasing your tax deductions significantly.
Cost segregation analysis can be performed on real estate put in service as far back as 1987. Recent changes in the tax law allow an automatic change in accounting method, which includes correcting a depreciation method. This allows you to deduct the depreciation benefits that were missed in prior years.
Franklin Tax Group has expertise with all types of properties. Our consultants are CPAs who, in conjunction with engineering support, develop the cost segregation study. (The IRS recommends using a third party for all cost segregation studies) We have experience with all types of properties, (see the links to the right hand side of this page). And, we work with your CPA to make sure you are getting the maximum allowable depreciation benefits.
Our studies are not limited to taxpayer-owned, stand-alone properties. The efficiencies we have created in analyzing real estate property give us the ability to analyze tenant improvements done in leased properties as well, while still keeping our fees reasonable.
Most CPA firms do not specialize in cost segregation analysis. The amount of time and resources (training, software, engineering support, study of relevant cost segregation tax law) often outweigh the amount of clients the CPA firm will have on an annual basis that can benefit from cost segregation analysis. That's why Franklin Tax Group works with your CPA firm to ensure your cost segregation analysis is correctly incorporated into your tax return and that you receive the maximum amount of depreciation deductions available.
For a free tax benefit analysis that will determine whether or not you would benefit from our services, click here.
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