Utility Studies

Analyzing the Benefits of Cost Segregation

Cost Segregation

Business owners are always looking for ways to make their operations more efficient, cost-effective and able to conduct precise and useful resources allocation. Did you know effective tax planning and strategizing can help a lot to achieve these goals?

Making the right tax plan and strategy frees up important capital that can be used in other areas of your business rather than passing along to Uncle Sam. One such tax planning strategy is cost segregation.

Cost Segregation in a Nutshell 

This tax planning strategy is essentially approved by the IRS and allows commercial property owners to accelerate depreciation of certain assets. How can this be done?

Reclassifying property assets from a standard 39 depreciable life to a 5, 7, or 15 year depreciable life will help get this done. Simply put, commercial real estate owners can reallocate value of their real property through engineering based cost segregation percentage. Real property can be reallocated to personal property under Code Sec. 1245.

What Items Qualify For Reclassification?

Assets that are eligible for reclassification (possibly resulting in tax depreciation) include:

  • Flooring
  • Landscaping
  • Paving
  • Electrical
  • Signage
  • Plumbing
  • Decorative lighting
  • Millwork
  • Partition walls

Cost segregation offers a lot of benefits for commercial property and business owners. The important ones are listed below:

Insurance Savings

Many insurance policies exclude or reduce cost of coverage for building components from insurance coverage policy. Building components at or below ground level such as underground utilities, sit preparation, off-site costs and parking lots aren’t counted.

A cost segregation study can help identify facility components subjected to reduction or no insurance cost. Proponents of cost segregation can contract needed insurance while avoiding additional costs.

Better Estate Planning

Cost segregation study and estate planning used side by side can help provide numerous tax benefits to commercial property owners and businesses. Both current and future estate owners can take advantage of accelerated depreciation values.

Some other benefits of this tax planning strategy are:

  • Immediate tax savings
  • Increased cash flow
  • Catch-up prior year accelerated depreciation
  • 1031 exchanges
  • Identification of qualified energy credit property to enhance energy efficiency

No doubt cost segregation can help commercial business and property owners a lot yet seeking the right professional help can tell just how to go about this process! Enguard is the best service for this! Call us today.

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