Cost segregation may be a valuable tool for commercial property owners as we continue to move through challenging times. We encourage you to review the information below, conduct your own research, and speak with your CPA to determine if cost segregation makes sense for you.
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Purchasers of real estate can gain tremendous tax benefits by using a popular asset depreciation technique called cost segregation. Using this method, buyers view a real estate acquisition as consisting not only of land and buildings but also tangible personal property and land improvements. The tax savings come from accelerated depreciation deductions and possible easier property write-offs. A taxpayer can use cost segregation when constructing a building, buying an existing one, or, in certain circumstances, years after disposing of one so long as the year of disposition still is open under the statute of limitations (see revenue procedure 2004-11). (Journal of Accountancy)
Cost segregation studies are conducted for a variety of reasons (e.g., income tax, financial accounting, insurance purposes, and property tax). For income tax purposes, cost segregation studies involve the allocation (or reallocation) of the total cost (or value) of property into the appropriate property classes and recovery periods in order to properly compute depreciation deductions. The results of cost segregation studies are typically summarized in an accompanying cost segregation report. (IRS Cost Segregation Audit Techniques Guide)
Find a cost segregation study provider: American Society of Cost Segregation Professionals