It is a wonder why so many companies still fail to take advantage of the cost segregation facility to lower their tax burden when numerous others have been taking advantage of the facility for a number of years now. The benefit is so significant and worthy the attention of every business that stands to benefit for conducting a study to segregate the cost.
What Is Cost Segregation?
Cost segregation is a process that is provided for under the tax laws of the US. It allows you to identify personal property assets that are categorized alongside real estate property assets. The aim of the study is to be able to separate the personal property assets or land improvements for the purposes of tax.
It is a way of improving your cash flow through the acceleration of depreciation deductions in an effort to reduce or eliminate state and federal income taxes. It is a valuable tax strategy that goes a long way to improve the cash flows of various businesses big and small.
The study is an engineering-based approach which identifies personal property assets such as buildings, exterior land improvements, non-structural elements, as well as indirect costs of construction. Al these costs are then depreciated over a short life-cycle, such as 5, 7, or 15 years. This is an improvement from the normal rate applicable to real estate properties with the exclusion of movable furniture, which are depreciated over 27.5, or 39 years. This maximizes the benefit that accrues to you making available more funds now rather than later. It identifies, quantifies and segregates the property and improvements.
Who Qualifies For The Benefit?
Cost segregation study can benefit any commercial property, including hotels, restaurants, resorts, shopping centers, warehouses, medical buildings, office buildings, multifamily buildings, high-tech facilities, assisted living facilities, automotive dealerships, manufacturing facilities, and even more.
Not every scenario warranty a segregation study and in terms of feasibility, properties featuring buildings with a cost basis larger than $250, 000. You should make sure that you get the segregation study right and this can be done if your securities the services of a competent tax professional. You can find a lot of options if you search online. Make sure you research on the background and the reputations of the options before you. Look at the online reviews as well and find one that has experience in handling your kind of scenario and need.