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Tax Services
How Does a Cost Segregation Study Decrease Your Taxes?
A cost segregation study carefully breaks down construction and/or acquisition costs and allocates them to specific asset categories, maximizing depreciation for qualifying costs. Our study allocates such costs to personal property asset classes with lives shorter than real property asset classes. The shorter the depreciation period, the greater your tax deductions and cash flow.The recently enacted Job Creation and Worker Assistance Act of 2002 plus recently issued Internal Revenue Service Procedures include provisions making the potential results of a cost segregation study more beneficial than ever.
These new provisions include a 30% depreciation bonus for certain assets (generally, those with a useful life of less than 20 years) acquired after September 10, 2001 and before September 11, 2004.
Additionally, adjustments to depreciation for "missed" depreciation deductions from prior years determined as a result of a cost segregation study can be reported as an automatic change in accounting method and deducted 100% in the year of the change rather than deducted over a 4-year period as previously required.
An AWR cost segregation study is based on an engineering approach combined with work paper documentation that provides the kind of detail and support generally required by the IRS and Tax Court.
What is Your Return on Investment for a Cost Segregation Study?
Substantial tax and cash flow savings can be achieved by taxpayers who properly classify their construction or acquisition costs between real and personal property. Every $1,000,000 reclassified from 39 years has an after-tax present value* of:
$220,000 for 5-year property
$200,000 for 7-year property
$120,000 for 15-year property
$200,000 for 7-year property
$120,000 for 15-year property
For residential rental property, every $1,000,000 reclassified from 27.5 years has an after-tax present value* of:
$180,000 for 5-year property
$80,000 for 15-year property
$80,000 for 15-year property
Who should Consider a Cost Segregation Study?
Owners of properties such as:
- Apartments
- Car Dealerships
- Golf Courses
- Grocery Stores
- Manufacturing Plants
- Hospitals/Clinics/Medical Offices
- Hotels/Motels
- Industrial Buildings
- Office Buildings Parking Lots
- Research & Development Centers
- Restaurants
- Shopping Centers
- Tenant Improvements
- Theaters
- Warehouses
- Retirement Communities/Nursing Homes
What is Needed for a Proposal and Tax Savings Estimate?
New Construction:
- Project Budget
- Final AIA Payment Application
- Indirect Costs
- Construction Contact Person
- Closing Statement
- Depreciation Schedules
- Site Survey Drawings
- Facility Contact Person
You need a firm with experience in cost segregation to assist you in classifying your property to save money, not only now, but in the future. We work in close affiliation with a professional group of construction engineers who have a thorough knowledge of the tax code and experience in successfully defending cost segregation studies before the IRS since 1981.
For more information on cost segregation studies, or to arrange an appointment to discuss your project, contact Pete Niestroy at 703-770-6389 or e-mail pniestroy@argypc.com.