Are you a commercial property owner?

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Are you a commercial property owner?
T a x R e d u c t i o n E x p e r t s
Bonus depreciation can help you Reduce Income
Taxes!
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WHAT IS BONUS DEPRECIATION?
Bonus Depreciation is a conservative, IRS-de?ned
approach for reducing or eliminating your
federal incomes taxes. Bonus Depreciation BOTH
reduces and defers state and federal income
taxes. It reduces income taxes by converting
ordinary income to capital gains. It defers
income taxes by increasing depreciation in the
?rst year of ownership.
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WHAT IS DEPRECIATION?
An accounting tool which allows a portion of your
asset value to be deducted each year from your
generated income, thereby reducing your net
income and resulting federal tax burden. This
provides an acknowledgement of the decrease in
value of personal property and/or some real
property due to wear and tear, aging, functional
obsolescence and other factors. Straight-line
depreciation allows you to depreciate your asset
over 39 years for standard commercial assets, or
over 27.5 years for apartments.
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WHAT IS DEPRECIATION? Let's consider a small
of?ce building
Purchase Price 2,000,000
Land Value 400,000
Depreciable Basis of Improvements 1,600,000
Annual Depreciation 41,025 (1.6M / 39 years)
When ?ling your income taxes for the ownership
entity of the asset, you would be able to deduct
41,025 in depreciation from generated income.
You would effectively save over 15,000 in taxes
(based on a 37 tax bracket) by utilizing
straight-line depreciation.
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WHEN COST SEGREGATION COMES INTO PLAY
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Cost Segregation breaks out the components of an
asset into the appropriate depreciation
life span, allowing for shorter recovery
periods and accelerated depreciation.
It involves parsing the asset into 5, 7, and 15
year depreciation periods, with the remaining
long life assets being broken out into the
requisite Units of Property
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CONSIDERING THE PREVIOUS EXAMPLE
Purchase Price 2,000,000 Land Value
400,000 Depreciable Basis of Improvements 5
Year Assets 192,000 7 Year Assets 8,000 15
Year Assets 208,000 39 Year Assets
1,192,000 Annual Depreciation 80,868 Thats
roughly DOUBLE the depreciation you can expect
from straight-line depreciation, and could lead
to bottom line tax savings of almost 30,000 in
the same 37 tax bracket.
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FINALLY, THESE ARE THE RESULTS WHEN BONUS
DEPRECIATION STEPS IN!
Any commercial, for-pro?t asset placed in service
or purchased after September 27, 2017 can be
depreciated by 100 of the value in the ?rst
year of ownership i.e. for any portion of the
asset with a depreciation-life of 20 years or
less For most commercial properties, O'Connor
typically ?nd assets with a depreciation life of
5 years, 7 years and 15 years, along with the 39
year depreciation life, during the course of our
cost segregation studies. Assets found in those
shorter depreciation life categories can be
depreciated 100 in the ?rst year of your
ownership of the asset.This can amount to between
25 and 45 of the total asset value, depending
upon our ?ndings during the site inspection!
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CONSIDERING THE PREVIOUS EXAMPLE
Purchase Price 2,000,000 Land Value
400,000 Depreciable Basis of Improvements 5
Year Assets 192,000 7 Year Assets 8,000 15
Year Assets 208,000 39 Year Assets
1,192,000 First Year Annual Depreciation
408,000 This is about 10 times the ?rst year
depreciation available via straight-line
depreciation, and more than ?ve times from
standard cost segregation! In a 37 tax bracket,
that equates to just over 150,000 in positive
bottom line impact
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Are you interested in taking advantage of the new
tax laws, protecting your bottom line, and
maximizing your cash ?ow, act now. www.expertcos
tseg.com