Cost Segregation is a widely accepted and highly beneficial tax planning strategy utilized by commercial real estate owners and tenants to accelerate depreciation deductions, defer tax, and improve cash flow. It is often overlooked, however, can result in thousands or millions in savings. Shopping malls, airports, sports facilities, driving ranges, resorts, industrial buildings, auto service centers, and more can benefit from Cost Segregation. So whether you’ve been thinking about it, or are just learning of it now, let’s take a look at the what, who, why, and how of Cost Segregation, and help to determine if it could be beneficial to you and your business.
What is Cost Segregation?
In a nutshell, Cost Segregation is an IRS-approved application in which commercial property owners can accelerate depreciation of certain assets. They can do so by re-classifying property assets from a standard 39-year depreciable life to a 5, 7, or 15-year depreciable life. Some analysis can help determine how much value implementing cost segregation might have.
Why Cost Segregation?
Cost Segregation helps individuals and businesses increase cash flow, accelerate depreciation, and reduce tax. Any structure used for business or as a rental property is eligible for the benefits of Cost Segregation.
What Items Qualify?
According to the IRS, a number of assets could be eligible for reclassification that could result in tax depreciation, including flooring, landscaping, electrical, paving, signage, decorative lighting, plumbing, partition walls, and millwork
Can I Take Advantage Of Cost Segregation?
If you’re a commercial real estate owner cost segregation is probably in your best interest. According to professionals, the vast majority of taxpayers who own, construct, renovate, or acquire a commercial real estate facility stand to benefit from having a cost segregation study performed.
When is Cost Segregation NOT a Good Idea?
If, as a property owner, you do not plan on holding a specific property longer than 2 years, cost segregation is not recommended as a tax strategy. There simply isn’t enough time to glean the full savings provided by the option.
If you’re not sure if cost segregation makes sense for you, talk to the tax professionals at Cornerstone Capital Systems. For more information, or to make an appointment, call (510) 412-1040 today.
For over 25 years Cornerstone Capital Systems has served the Bay Area as a trusted ally, striving to take the sting out of tax liability, with year-round services. We work with individuals, small and mid-sized businesses, providing tax planning and preparations. With the size of our firm and the depth of industry knowledge and experience, we can handle all of your tax and accounting needs.