What is Cost Segregation?

“Cost Segregation Studies are a lucrative tax strategy that should be considered in almost every real estate purchase.”  ~ U.S. Treasury Department

This all started because someone sued the IRS, citing the fact that 39.5 years of a depreciation schedule is simply unreasonable… 

Wait wait, what is depreciation??  According to google dictionary, depreciation is a reduction in the value of an asset with the passage of time due to wear and tear.  This is where you buy some commercial property for your business, you claim the investment as a write-off on your taxes.  This reduces taxable income.  By default the value of a building is divided by 39.5 years, you cannot claim the purchase in the year you bought it, the purchase is spread out over this many years.  Which means, if you have purchased a building for 10 million, you will claim $256,420 a year as a deduction from the profit you pay taxes on with the ‘normal’ Straight-Line method. 

How you find this tax benefit is with accelerated depreciation.  With this, you can write off 20% to 30% of the purchase price within 5, 10 or 15 years instead of spreading it out over 39.5 years which is default.  For a 5 year plan, on a 10 Mil piece of property, lands you at a total of 692,308 that you can claim per year.  The difference can be 435,981 in savings for your business.  That’s an incredible increase to the bottom line!  

In a Cost Segregation study an engineer takes a look at things like HVAC, electrical, plumbing, flooring, wall coverings, specialty lighting, decorative ceilings, cabinetry and landscaping.  When you undergo a remodel, the changes to the building are also considered.  

Only 5% of people who are eligible for this tax break are doing it and doing it correctly.  Are you a business owner who is new to this topic?  Well you are reading it at the right place!  We do the research, the study, the meetings, and bring you these savings back, including the amount not claimed for the past 15 years!!!  Do you qualify?  We offer a straightforward and simple process.  We meet, ask you a few questions, fill out a form, you sign and then we start bringing on the experts.  Then we gather some documents and ask some more questions.  The whole process takes between a few weeks to a few months.  And the cost… well, that is the best part.  We do not charge you upfront, we take a cut from the return, and from the savings.  This means, we don’t make any money unless we make you money.  

Here is a helpful link from the IRS website about this tax deduction: