|
Cost Segregation Study
What is a cost segregation study?
The 1993 Tax Act extended
the depreciable life of real property from 3The 1993 Tax Act extended the
depreciable life of real property from 31.5 to 39 years. Substantial tax and
cash flow savings can be achieved by taxpayers that properly classify their
construction or acquisition costs between real and personal property. The
result being that every $1,000,000 of personal property produces a present
value tax benefit of approximately $220,000.
Our study carefully breaks down your construction or acquisition costs and
allocates them to specific categories--maximizing accelerated depreciation
for qualifying building components. The shorter the depreciation period, the
greater your tax savings. This study could also be used to increase your
sales tax exemptions, lower your property taxes and provide the basis for
your property records system.
The key is our engineering approach and work paper documentation. We believe
this provides more detail and support than any in the industry. The
professionals we work with are construction engineers with knowledge of the
tax code and are experienced in successfully defending our studies in front
of the Internal Revenue Service (IRS) since 1981. Using tax and construction
skills, we thoroughly analyze your construction or acquisition costs. We
perform quantity take-offs from the construction drawings, which maximize
the amount of personal property costs and provide the required documentation
to support our conclusions.
Having your accountant or
general contractor segregate percentages of construction subcontracts or
invoices can leave significant and valuable tax benefits on the table and
this method will not withstand an IRS audit.
Small or large, your business can save money with a cost segregation
study--typically many times the amount you invest. Let Ed Lloyd & Associates
and our cost certification engineers help you segregate what is available in
every square foot of your property.
How does a cost
segregation study work?
Building costs
are generally classified for federal income tax purposes into three
categories. Each has a different depreciation recovery period and method
under the Modified Accelerated Cost Recovery System. (MACRS)
Our cost
segregation study will help you identify items that should be properly
classified as tangible personal property or land improvements, rather than
real property that is depreciated over 39 years. The tax benefits begin in
the first tax year and continue throughout the depreciable life of the
identified assets.
For example, a taxpayer that owns a manufacturing facility could classify
the cost of certain equipment foundations, exhaust and ventilation systems,
security systems, and electrical distribution as tangible personal property.
Certain site improvements such as landscaping, underground utilities, and
site lighting could qualify as land improvements.
How Much Can You
Save on Taxes by Accelerating Depreciation Deductions?
|
Any
capital-intensive business that invests in a cost segregation study can
potentially achieve a payback of about 22 cents for each dollar
reclassified as 5-year property and about 8 cents for each dollar
reclassified as 15-year property.
Our detailed cost segregation studies pay for themselves many times
over, starting with the first year the property is placed in service. By
investing in one of our professionally prepared cost segregation studies
you will have the assurance that you have maximized your depreciation
benefits and have fully documented support for your depreciation claims
should you be audited. |
|
