Want to Know How Cost Segregation Can Save Money in Taxes?
PHB is connected with countless professionals who are experts in their field. We love to share their knowledge with all of our customers! So read on to debunk the many myths that exist about cost segregation.
According to the U.S. Treasury Department, “Cost Segregation Studies are a lucrative tax strategy that should be considered in almost every real estate purchase.”
An average Cost Segregation Study offers approximately $150,000 in additional depreciation per $1 million dollars in purchase or construction cost over the normal 39 year straight line method.
“Cost Segregation Studies are a lucrative tax strategy that should be considered in almost every real estate purchase.” -U.S. Treasury
“…Cost Segregation Studies should be performed by qualified individuals or firms such as those employing personnel competent in design, construction, auditing, and estimating procedures relating to building construction.” -U.S. Internal Revenue Service
Growth Management Group (GMG) utilizes a team of highly qualified professionals adhere to the IRS recognized Detailed Engineering Approach to perform all Cost Segregation Studies. This methodology maximizes benefits and assures that IRS guidelines are followed.
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Valuable tax savings are embedded in your buildings and are often overlooked. GMG cost segregation experts are trained to identify and segregate shorter-lived assets (those qualifying for 5-, 7-, or 10-year write-off periods) that are generally buried in a building’s construction or renovation costs (which are generally depreciated over 39 years).
By reclassifying assets and accelerating their depreciation, we accelerate expense and decrease your taxable income. You pay less tax during the early stages of a property’s life. The present value of the tax savings can be tremendous.
Under certain circumstances, the assets identified may also qualify for the special 50 percent bonus depreciation allowed by the American Recovery and Reinvestment Act of 2009.
We perform an engineering based study.
During a cost segregation analysis, our professionals will:
- physically inspect the property
- examine architectural and engineering drawing and specifications for potential asset reclassification
- appropriate direct labor and material costs, based on engineering specifications, to shorter lived assets as applicable
- analyze cost data, including the contractor’s application of payments, change orders, owner-incurred costs, and indirect disbursements, to determine if they can be allocated to shorter-lived assets
- prepare an itemized list of assets qualified for shorter-life classifications based on relevant income tax authorities
- Create a report that is fully documented and in compliance
A properly documented third-party cost segregation study can help resolve IRS inquiries at the agent level, while improper documentation of cost and asset classification can lead to an unfavorable audit adjustment. With a cost segregation study, you’ll have the evidence you need to withstand IRS scrutiny because our procedures are based on IRS and judicial rulings. In addition, we create an “audit trail” which ties the cost and classifications of assets to contract documents and other source data.
No risk, no obligation analysis… We’ll provide a no-cost, no-obligation analysis including an estimate of present value tax savings and fees.
There is nothing to lose by exploring cost segregation as a tax reduction strategy for any business – unless, of course, you like paying taxes.