January 24, 2024

Cost Segregation Analysis

What is a Cost Segregation Analysis?

A cost segregation study allows real property owners to increase cash flow by deferring and reducing income taxes. This is possible through the identification of real estate assets that can be depreciated at an accelerated rate with shorter lives.

Can you benefit from a Cost Segregation Study?

A cost segregation study can be beneficial for almost any business that owns real estate and pays income tax. If you have constructed or purchased your own office building, you could receive a current income tax deferral.

The benefits of a cost segregation study include:

  • Immediate increase in cash flow through a reduction of income taxes.
  • Reduction of local property taxes by separating real and personal property.
  • Provides an easy opportunity to claim “catch up” depreciation on reclassified assets.

When should a Cost Segregation Study be conducted?

The ideal time to obtain a cost segregation study is at the time a building is constructed or purchased. However, a study can also be performed anytime after the building is built or bought. The IRS has enacted special provisions to allow you to “catch up” depreciation deductions not claimed in prior years.

Who can conduct a Cost Segregation study?

The IRS has recently issued rulings to outline specific guidelines to be followed when preparing a cost segregation study. Based on these rulings, a quality study “requires knowledge of both the construction process and the tax law involving property classifications for depreciation purposes”. Our analysis includes not only architects and engineers with knowledge of the construction process, but also tax professionals with an understanding of the application of depreciation methodologies and the proper procedures for claiming any missed deductions. This collaboration ensures your study will maximize your current deductions and stand up to IRS scrutiny.

What does a Cost Segregation Study cost?

The cost of having a cost segregation study conducted will vary by building, but a complimentary estimate will be provided projecting the tax deferral available and the estimated cost of the study.

Contact our office at 913-831-7999 for further information.

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