DC Consulting is a leader in Cost Segregation Study, using IRS approved Engineered method providing tax benefit to business owner and investors.
What is Cost Segregation?
Any commercial property owner (subject to US federal and state tax laws) who has done any of the following since 1987 would most likely qualify for the tax benefits a Cost Segregation study could provide.
A cost segregation study is essentially a service that allows building owners to deduct depreciation earlier. (In case you were wondering yes, it’s approved by the IRS.) The study involves analyzing the components of a building and reclassifying certain items such as flooring, cabinetry, furniture, appliances, fixtures and land improvements, to name a few, to depreciate over 5, 7 or 15 years.. and possibly even 1 year! Whereas generally buildings are depreciated over 27.5 or 39 years. By accelerating the depreciation deduction of certain assets, building owners often gain both tax savings and cash.
Why Do You Need Cost Segregation Study?
A cost segregation study will try to shift eligible personal property items into a 5- or 7-year bucket and land improvement items into a 15-year bucket.
What counts as personal property? Typically, it’s items that you can move, such as appliances, but it also includes such items as specialty flooring and decorative wall coverings along with built-in cabinetry.
Land improvements are exterior items such as paving, retaining walls and landscaping.
Cost segregation is a useful tax strategy that allows real estate investors who have acquired, built, or purchased land or real property to reduce their taxable income by having a cost segregation study or segregation analysis completed on the property.
As a result, the property owner’s income tax rate can be lowered because they are able to write off assets at a more accelerated rate than traditional straight depreciation limits allow, increasing their business’s cash flow and profitability.
“As a result, the property owner’s income tax rate can be lowered because they are able to write off assets at a more accelerated rate .”
When Should You Start Planning For Your Cost Segregation Study?
You should start planning to get your cost segregation study as soon as the building is complete if it is a brand-new construction. If you’re purchased building, you should plan as soon as the purchase is in escrow stage.
How To Report Cost Segregation Depreciation?
You’ll need to work with your CPA or we can recommend a CPA that we work with and is familiar with the Cost Segregation Tax Reporting.