A cost segregation study is an engineering-based analysis that reclassifies commercial building components and improvements into their proper asset life categories for depreciation purposes. This reclassification accelerates the depreciation periods from 39 or 27.5 years to 15, 7, or 5 years. The shorter depreciation periods result in more depreciation expense which is recorded sooner!
Only if you’re interested in keeping MORE of YOUR money! Increased depreciation expense means reduced reported income, which means less income taxes owed!
I can provide a FREE, no obligation estimate of your commercial building so you and your tax advisor can evaluate the potential tax benefits.
Originally cost segregation studies were only done by the major accounting firms, on very expensive buildings and the studies were tremendously expensive! One study originally cost upwards of $100,000! That initial perception of cost segregation still lingers and that’s why building owners and CPAs don’t think about it or they still think it’s too expensive.
Your property qualifies if you:
1.) Purchased, constructed, or remodeled property after December 31, 1986.
2.) Anticipate holding the property for at least a few years.
Cost Segregation is a one-time study, but the benefits will be realized for years to come! By accelerating more depreciation expense earlier, you’ll have the benefit sooner and can use the savings in whatever way you choose!
It is best to have a study completed in the tax year the building or improvements are placed in service. However, the U.S. tax code allow taxpayers to “catch up” on the depreciation that was not claimed from the first day the property was placed in service without amending prior years’ tax returns.
No! U.S. tax code allows taxpayers to “catch up” on depreciation that was not claimed from previous years through the filing of a “change of accounting” form. This does not affect previous years’ tax returns. We will prepare this change of accounting form (IRS form 3115) on your behalf so that’s one less thing your CPA has to do! Furthermore, recent U.S. tax code allows for the “catch up” entry to be recorded in the first year rather than over four years, as originally introduced.
YES, but not as a tax preparation fee. The fees for cost segregation can be deducted just like any other professional services you use in the course of your business.
While each study differs, I’ll initially request the following information:
- Brief description of your building
- Month and year of purchase
- Property Address
- Cost and date of any building improvements (since purchase)
While not required, if the previous year’s depreciation schedule is available, that will make the initial estimate much more accurate.
The studies are conducted by Cost Segregation Services, Inc (CSSI) based in Baton Rouge, Louisiana. CSSI is the nation’s premier company providing engineering-based cost segregation studies for U.S. commercial building owners.
After the landmark cost segregation court case in 1997, CSSI’s founder, Jim Shreve, was commissioned to develop an efficient, affordable, and compliant engineering-based method to provide cost segregation studies for commercial and residential rental properties in the U.S.
This means you can take advantage of the tax savings that was once only enjoyed by the owners of exceptionally large properties! CSSI’s study approach allows us to provide not only the best possible results, but we also scour all the recent changes to the U.S. tax code (TCJA of 2017, Tangible Repair Regulations of 2014, etc.) to ensure your compliance with the regulations while receiving the maximum benefit from these regulations.
CSSI has on-staff lawyers, tax accountants, and construction engineers to perform the necessary analysis that the IRS requires in order to file and claim the tax incentives that most people don’t even know exist.
CSSI’s cost segregation personnel have the expertise in tax laws, court cases, and rulings on cost segregation, along with real estate development and construction experience to maximize your benefits. Over the last 19 years, CSSI has performed over 20,000 cost segregation studies nationwide and our studies have NEVER triggered an IRS audit! Our goal is to support your CPA or tax advisor with the most accurate cost segregation study results as well as other building regulation interpretations to maximize your savings and increase your cash flow!
Building components are generally classified for federal income tax purposes into three categories:
- Tangible Personal Property
- Land Improvements
- Real Property
Each category has a different asset life and recovery method under the Modified Accelerated Cost Recovery System (MACRS). Our engineering-based cost segregation analysis is performed by personnel with in-depth knowledge of construction methods, materials, and building components and can perform a detailed analysis to properly identify the building components and improvements that will be reclassified to take advantage of accelerated depreciation.
If you are under audit for any reason and our study comes into question, a cost segregation study professional from CSSI will attend the audit on your behalf, free of charge.
No. However, for projects not yet constructed, CSSI can provide estimates on tax savings from your construction budgets. A full CSSI Study can be started when construction is complete.
The Work Opportunity Tax Credit (WOTC) is a Federal tax credit available to employers who hire individuals from certain target groups who have been identified as having significant barriers to employment. Nationwide, employers claim about $1 billion in tax credits each year under the WOTC program. There is no limit to the number of individuals an employer can hire to qualify and claim the tax credit!
WOTC credits range from <strong>$2,400 to $9,600 per person!</strong> There is no limit to the number of individuals an employer can submit.
WOTC credits apply to BOTH full time and part time employees as long as they are W2 employees and not 1099 contractors. The WOTC credits are “employer-centric” not “employee-centric”, which means if an employee works part time for multiple companies, <u>EACH company</u> they work for can claim a WOTC credit!!
The WOTC credit is general business tax credit that can be applied to the previous tax year OR carried forward up to 20 years!