What is It?
Effective tax planning is crucial for maximizing your financial success. One of the most powerful tools in our arsenal is Cost Segregation, a strategic tax planning strategy that can significantly enhance your tax savings and improve cash flow. The Cost Segregation process involves the detailed engineering-based analysis of a property to identify real-estate property or building components that will generate accelerated depreciation deductions and federal tax deferrals.
The goal of a cost segregation analysis is to segregate assets into distinct class categories including personal property, land improvements, and structural components. By identifying your property components and reclassifying those assets, you can accelerate deductions and generate an immediate tax depreciation deduction in the current tax year, tax deferrals, and an opportunity to redeem depreciation deductions in preceding years allowing for substantial tax savings in the early years of ownership.
Cost Segregation studies will identify and reclassify building assets into shorter-lived categories for depreciation purposes, typically 5, 7, or 15 years instead of the standard 27.5 years for residential or 39 years for commercial. By accelerating depreciation, property owners can reduce taxable income, defer taxes, and free up capital for reinvestment or business growth.
The best time to conduct a Cost Segregation study is immediately after construction or purchase or following renovations or major improvements. You may also do one retroactively on properties placed in service in prior years with “catch-up” depreciation through a Form 3115 without amending tax returns. There is no statute of limitations on when a cost segregation study can be performed to claim missed deductions! Understanding the tax implications of your property investments can help you make more informed financial decisions and optimize your overall tax strategy.
What is our Cost Segregation Process?
- Free Benefit Analysis - We estimate your potential benefit and deliver to you a free Benefit Analysis at no cost or obligation prior to engagement.
- Site Visit - Our team will conduct a site visit to the property to collect audit-ready documentation for your study.
- Property Analysis - Our specialist then conducts a thorough engineering analysis of your property, identifying all eligible components for reclassification.
- Detailed Reporting - We deliver a comprehensive, audit-ready cost segregation report to you and your CPA that outlines the reclassified assets, the associated tax benefits, and the potential savings.
- Ongoing Support - We stay with you throughout the process ensuring you understand the implications of the study and how to leverage the findings for maximum benefit. We work directly with your CPA through your tax filing and stand behind our studies in case of audit.
