Could you benefit from cost segregation?
Almost any taxpayer who owns commercial real estate can reduce his or
her current income tax bill by using cost segregation. Just how much you save
in taxes will depend on several variables. The greater the cost of your
property, the greater the potential for current tax savings.
Any building that was constructed, purchased, or remodeled since 1987
may be eligible for cost segregation. Retroactive tax deductions are available
on older buildings without the need to file amended tax returns.
To pass an IRS audit for these deductions, you will want to use a
cost-segregation specialist. This will usually be a construction engineer who
can perform a detailed engineering study of all the building components (walls,
ceilings, floors, plumbing, electric, telecommunications, heating and cooling
systems, etc.) and assign the appropriate value to each. Those elements that
qualify for five, seven, or fifteen year write off will provide the property
owner with greater depreciation deductions and hence lower taxes in the early
years.
The downside may be the cost to do the study versus the accelerated
cash flow and possible penalties from the IRS for those who use cost
segregation too aggressively.
The main elements of a proper cost segregation study are:
*
Conducted by someone with valid credentials as
to experience and expertise.
*
A detailed description of the proper
methodology.
*
Complete and proper documentation.
*
A full listing of all property that qualifies
for shorter write off periods.
A properly conducted cost segregation study can provide a property
owner with cash today that he or she would not otherwise get for several years.
An initial consultation with a cost segregation specialist can help
you determine if your property is a candidate for a full blown study.
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