How Can Cost Segregation Help Minimize Your Tax Burden

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How Can Cost Segregation
Help Minimize Your Tax Burden
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What is cost segregation?
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Cost Segregation is a commonly used tax planning
method that allows Organizations and individuals
who have constructed, purchased, expanded, or
remodeled any kind of real estate buildings, to
get a reduction on their taxable income by having
a cost segregation study or segregation analysis
on the property. If you, an investor, purchases
a property, the value does not just come from
the structure itself. As much as 20 to 40 of
both these components fall under tax categories
that can be written off much quicker than the
structure itself.
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More on cost segregation
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Any type of commercial property can be a
candidate for cost segregation, especially when
it has been in service after December 31,
1986. Note that any size also qualifies
however, lower valued properties might not be
good candidates Usually, it makes more sense for
properties to have a 1 million depreciate cost
basis or even more.
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Bene?ts of Cost Segregation study
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Many business owners are surprised to learn of
the compelling tax savings by cost segregation
study. Here the list of three most prominent
benefits. Cash Flow Generates immediate increase
in cash flow through accelerated depreciation
tax deduction. Write Off Quantifies propertys
major components and leasehold improvements so
you can be written off when replaced or
renovated. Review It provides an independent
third-party analysis that will withstand of IRS
review.
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How cost segregation works?
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A cost segregation study should be completed by a
professional and the study will separate certain
qualified items that would normally be
considered 1250 property.
This could include, The electrical system
Specialized kitchen equipment Carpeting Wall
coverings Partitions Millwork The ventilation
system
Special plumbing Lighting fixtures The phone
system The computer system Process piping
Storage tanks A concrete slab floors
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Who quali?es for cost segregation study?
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Cost segregation studies will not suit everyone,
its only applicable for commercial real estate
investors or rental property owners with
significant real estate activity that would
benefit from a notable reduction in their
federal income tax rate. The cost segregation
studies, and the examination steps will
facilitate the audit process and minimize the
burden on taxpayers, practitioners and service
examiners alike. And to know more on cost
segregation visit www.enrichedrealestate.com