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In today's economic environment, the construction, expansion, or purchase of a new building is an expensive undertaking, and its effect has to be projected into the future to determine its economic impact. A cost segregation study will allow you to properly classify your construction or acquisition costs between real and personal property in order to generate much larger tax deductions and cash flow savings.
A cost segregation study is primarily a strategic tax tool. Under the Internal Revenue Code, residential rental buildings are currently depreciated over 27.5 years; non-residential buildings over 39 years. Businesses that can benefit from cost segregation studies include . . .
Healthcare services (hospitals, ambulatory centers, physician offices)
- Manufacturers
- Auto dealerships
- Restaurants
- Retailers (department stores, shopping malls, distribution centers)
- Financial services (banks, brokerage firms)
- Sports facilities and spas
- Apartment complexes
- Office complexes
- Hospitality facilities (hotels, motels, golf ranges, resorts)
A cost segregation study identifies costs that can be allocated from these longer class lives to depreciable lives of five, seven, or 15 years. This allows for accelerated depreciation deductions for income tax purposes, increased cash flow, deferred federal and state taxes, and potential tax credits. What's more, from September 11, 2001 through September 11, 2004, assets with depreciable lives of 20 years or less receive an additional 30 percent depreciation deduction for the first year the building is placed into service.
At BPCD&S, we believe a successful cost segregation study combines a professional engineering approach with thorough work paper documentation. We work closely with a professional group of construction engineers who know the tax code, have performed over 4,000 cost segregation studies, and have significant experience defending studies before the IRS. Our combined accounting and engineering expertise enables us to read blueprints and fully understand construction materials, costs, and taxation. We also have extensive knowledge of the Internal Revenue Code, including applicable tax court cases and revenue rulings.
Using our tax, construction, and engineering skills, we will start your cost segregation study by thoroughly analyzing your construction and/or purchase costs. Then, we will perform quantity take-offs from the construction drawings to maximize the amount of personal property costs and provide the required documentation to support the conclusions.
Starting with the first year your property is put into service, our detailed cost segregation studies pay for themselves many times over. By investing in a professionally prepared cost segregation study from BPCD&S, you can be assured that you have maximized your depreciation benefits and that you also have fully documented support for your depreciation claims in case you are audited by the IRS.
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