Janet Mason 
Cost segregation services have now emerged as one of the most effective tax-saving arms of commercial property owners seeking to ensure that they get maximum returns on their investment. Cost segregation can lead to a substantial decrease in taxable income–by accelerating the deductions allowed on depreciation–hence liberating cash flow to be used to reinvest and grow.
The Ultimate Guide to Cost Segregation for Commercial Property Owners
Cost Segregation: What is it?
Cost segregation refers to a very strategic tax planning tool that enables property owners to recategorize some of the building elements and improvements into shorter depreciation categories. Under the new system, instead of depreciating an entire property over 39 years (commercial) or 27.5 years (residential rental), some items such as lighting, flooring, and landscaping can be depreciated over 5, 7, or 15 years.
Depending on the phase of growth your business is in, there may be significant up-front tax savings as part of this process, and you can make your way back far quicker than they can under traditional depreciation models.
Working with the Cost Segregation
A cost segregation study entails an analytical examination of your property engineering-wise and in terms of finances. Specialists will:
- Study the construction plans and blueprints to find out the eligible components.
- Go to the property and physically inspect it to ascertain the value of each of the assets.
- Recharacterize eligible assets into less lengthy write-off planning.
- Gather documentation to prove your fast charges on expenses in case the IRS audits your records.
Advantages to Property Owners of Commercial Property
The major advantages of implementing a strategy using cost segregation are as follows:
- Tax Savings Immediately at a Lower Tax Rate – the accelerated depreciation reduces your taxable income during the early years of property ownership at a lower tax rate.
- Better Cash Flow – A Greater pool of cash in your business, thus you are able to re-invest quickly.
- Increased ROI on Property Investments – When you have the capital free, then you can expand your portfolio or improve the old assets.
- Potential of Amended Returns – Any downside of owning your property over a number of years, and you have not done a study, you may be able to file missing depreciation as a way of catching up.
Cost Segregation Services: Who is it designed to serve?
Cost segregation does not only apply to huge companies. You can enjoy the tax benefits regardless of the type of commercial properties you own: office buildings, warehouses, hotels, retail property, and multi-family. In most instances, the greatest returns come when the properties have been bought, built, or remodeled with the cost exceeding 500,000 dollars.
Timing Matters
A cost segregation study is best carried out in the year of purchase, construction, or extensive renovation. But wait, the study is over, and you did not take the chance, too bad, you can do the write-up retrospectively.
Collaboration with the Proper Professionals
Because cost segregation is highly technical, with engineering and tax expertise, it is important to put to work a team of experienced professionals. Authoritative sources help you to report IRS-compliant with maximum deductions. Seek companies that have a track record, prefer detailed reporting, and deep industry insight.
Final Thoughts
Cost segregation is no longer merely a tax savings strategy; it is a powerful means of returning the commercial property owner cash, accelerated returns, and overall increases in the performance of his/her investment. With the help of the services of an experienced cost segregation expert, you can reap huge financial rewards and rest assured that your property is earning income to reflect in your bottom line.
