As a CPA led business and tax advisory firm, we are experts in tax reduction strategies. We do this by getting to know you, your goals and your business. One of our specialties is cost segregation, a powerful tax-saving tool for real estate investors and qualified real estate professionals.
What is Cost Segregation?
Cost segregation is a strategic tax planning tool that allows companies and individuals who have constructed, purchased, expanded, or remodeled any kind of real estate to increase cash flow by accelerating depreciation deductions and deferring federal and state income taxes.
In simple terms, cost segregation identifies and reclassifies your real estate assets to shorten the depreciation time for taxation purposes. This reduces your taxable income and your tax obligations. We’ll help identify personal property assets that can include a building’s non-structural elements, exterior land improvements, and indirect construction costs.
How is Cost Segregation Done?
The process of cost segregation involves a detailed analysis and engineering review of the property, followed by a reclassification of the costs of the property’s components into appropriate and often times shorter-lived asset classes. It’s a complex process that requires specialized knowledge of both the tax code and construction methods.
And that’s where our team comes in. We’ll analyze your property and conduct a study using our software and our real estate consultants to produce a high-quality, audit-proof report based on the principles and pricing data most preferred by the IRS. By using the most accurate construction cost data in every study, we can create the most defensible tax basis allocation.
The Power of Cost Segregation for Real Estate Investors
For real estate investors, cost segregation can lead to substantial tax savings. The increased depreciation can result in significant reductions to your current year taxable income and tax payments. With more money left over, you can use this to reinvest into your business or pay down debt.
By deferring tax payments, you basically get an interest-free loan from the government. The time value of money and the ability to invest these tax savings elsewhere in your business can create a significant return on your cost segregation study investment.
Cost Segregation for Qualified Real Estate Professionals
If you’re a business owner who also qualifies as a real estate professional under IRS rules, cost segregation can be especially beneficial. This status allows you to offset the losses from your real estate investments against your ordinary business income, which can lead to enormous tax savings. It’s like finding money you didn’t even know you had!
And in order to qualify as having real estate professional status, you must follow specific rules. We can help you identify what activities qualify you and what specific rules you must follow.
We’re Here to Help You Save on Taxes
We’re here to help you understand and apply this and many other often overlooked tax reduction strategies to save you money on taxes. Don’t get caught by surprise or face an IRS audit because you didn’t correctly categorize your assets of apply your real estate income to your operating income.
Want to know more about how cost segregation can benefit you? Don’t leave money on the table. On average we help our clients save over $54,238 in taxes per year!