The ultimate aim of the cost segregation study is to increase the current cash flow by reducing the overall tax burden for the tax payers to the IRS and local taxation authorities. Although this field is considered as boring and time taking but tax saving and larger tax refund come in very handy while dealing with the check from the Internal revenue service. Cost segregation is such a field where the role of a specialist becomes a must. As long as you take the help of professionals, you would be very pleased with the outcome of this special report. |
Not every commercial organization does an analysis on it as some real estate properties operate at a loss before accelerating depreciation. In case of depreciation, spending money of cost segregation study does not result in tax savings. In fact dealing when one deals with real estate potential passive losses, there are cases when an increased loss will not result in tax saving. Therefore it makes sense to consult with your tax advisors while going for a cost segregation study.
A typical cost segregation study helps in maximizing the tax benefit of real estate ownership by identifying, segregating and classifying a building’s components to asset categories with the shortest possible life thereby creating significant tax deductions sooner for federal and state income tax purposes. An analysis has reclassified the components of a building from 27.5, 31.5 and 39 year depreciable lives to five, seven and fifteen years respectively. The benefit comes from accelerating the tax depreciation.
Non structural items like carpet, accent lighting and signage or exterior item such as paving, sidewalks are the perfect example of the building components eligible for accelerated depreciation and are items that can be broken out from structural costs and depreciate over a shorter period.
The most overlooked tax-saving opportunity is accelerated depreciation of cost associated with construction, renovation or purchase of a new building or a real estate. One can boost his return on investment by taking advantage of certain techniques and it is here where the understanding of cost segregation study becomes very important. It helps in improving the profitability and increases the return on investment by many folds.
It is a very common phenomenon that property owners across the world reduce taxable income and maximize current depreciation by accelerating deductions and thereby increasing the after-tax cash flow. In addition to all these factors cost segregation study plays a decisive role.
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