The Benefits of Cost Segregation
Our partners performs a detailed analysis of your commercial property for the purpose of identifying all of the construction related expenses that can be depreciated over 5, 7 and 15 years. The result of our study is the accelerated depreciation of these deductions, reducing your tax liability and increasing your cash flow.
By combining the expertise of ES Group and our partners engineers who are experienced in cost and construction estimating, tax codes and IRS documentation, ES Group can get you:
- Material reductions in your federal and state tax liabilities for the year of the study and the next decade – typically hundreds of thousands of dollars.
- A more detailed breakdown of the many components that comprise your building which will make repair, remodeling and replacement of the same less costly and more beneficial to you.
- Probable increase in capital gain income taxed at 25% on the sale of your building. For buildings you propose to construct, the study can actually reduce the cost per square foot.
- Immediate increase in cash flow through accelerated depreciation deductions by reducing Federal and State income taxes.
- Reduction in real estate property taxes. Property taxes are calculated as a percentage of the building costs. Personal property should be accurately removed from the cost of the structural components and should not be subject to property taxes.
- Tools and information to correct misclassified assets and the opportunity to claim, “catch up” in the current year.
- Benefits bank loan qualifications.
- Reduction in insurance costs by identifying the components of the property that do not need to be insured.
- Demolition & Rehabilitation. A cost segregation study will identify the components of a building, which can be classified as personal property versus real property for write-off versus capitalization prior to demolition & rehabilitation. This allows the property owners to write off these items opposed to capitalizing the assets. This can generate substantial tax benefits.
- A bridge to shrink the gap between engineering, construction and accounting systems.
Reasons Benefits are often overlooked:
- Commercial property owners are not aware of the magnitude or importance of the potential benefits.
- All components of “real estate” are assumed to be “real property” for Federal tax purposes.
- Complexity of the tax law requires familiarity with numerous IRC sections, regulations, revenue rulings and case law.
- CPA’s and the property owner are unable to extract the necessary detail from contractor invoices and payment applications, or the property is purchased well after the building has been built and the necessary information is not available.