A cost segregation study increases your current cash flow by accelerating federal and state depreciation deductions. Property owners use cost segregation as a strategic tax planning tool for constructed, purchased, expanded or remodeled real estate.
“Tangible personal property” can be depreciated more quickly than the cost of the structure itself. By accelerating a buildings’ depreciation, property owners can lower their tax liability and thus realize a significant increase in cash flow. This larger cash flow—resulting from postponing tax payments—is available for other investments.
It’s all about the details
Gladstone Strategies and Solutions conducts engineering-based cost segregation studies – an approach described by the IRS as “the most methodical and accurate.” We use actual cost data as much as possible in our analysis, and our cost segregation studies are prepared in a manner to stand up to any challenge by tax authorities.
Engineering-based cost segregation studies provide more precisely segregated property information, providing the information and detailed supporting documents needed to meet the strictest of IRS requirements.
As part of the evaluation:
• Some assets previously classified as a standard 39-year depreciable life can now be classified with a shorter deprecation schedule, such as 5, 7 or 15 years.
• The total depreciable amount of the building cost does not change.
• A portion of the total depreciation is accelerated into shorter time periods.
What types of items are identified?
A quality cost segregation study evaluates all information available including records, blue prints, inspections and interviews. When a property is evaluated, the cost segregation specialist systematically reviews not only the building structure, but also all of its interior and exterior components. Items that can qualify for accelerated depreciation include:
• electrical installations
• mechanical components
Gladstone goes beyond a traditional cost segregation study and also separates all of the building’s different structural components – such as the roof, windows or HVAC units – so that when they are replaced, a loss deduction can be claimed on them.
When should a cost segregation study be conducted?
Ideally, tax planning for real estate depreciation and amortization should begin prior to the construction or acquisition of the property, when you have the greatest flexibility in planning options. An analysis can be started as early as the beginning of the design process and as late as years after completion of the property. Proper planning will allow you to maximize your depreciation deduction.
The process of cost segregation analysis is not straightforward. We have knowledge of both the engineering and construction process to aid in cost estimating and allocation, as well as a deep understanding of complex tax laws. Our team’s experience and technical expertise means your final report is produced efficiently with minimal disruption to your work.
The bottom line
Asset depreciation decisions are critical, and a cost segregation study is the best way to ensure nothing is being missed. It offers you the opportunity to:
• defer taxes
• reduce your overall current tax burden
• improve your current cash flow.
Trust the proven specialists at Gladstone Strategies and Solutions to deliver accurate and detailed reports, helping to boost your bottom line as a result. At Gladstone, we have the expertise in construction and real estate to maximize your savings.