Cost Segregation is a powerful tax planning tool which generally results in reduced income tax obligations for real property owners. A Cost Segregation Study identifies personal property assets that would otherwise be grouped with real property assets and reclassifies the allocable cost of those assets as “personal property”, thereby shortening their depreciable life for tax purposes.
Just a Few of the Benefits of Cost Segregation
- Material reductions in your federal and state tax liabilities for the year of the study and the next decade - typically hundreds of thousands of dollars.
- Immediate increased cash flow through accelerated depreciation deductions by reducing income taxes.
- Enables property owner to correct misclassified assets and claim “catch-up” depreciation in the current year. Tax law allows owner to recapture tax deductions that would have been allowed had analysis been performed earlier.
- Identified personal property components of a building can be written off when replaced which could create two benefits; a) immediate deductions for the undepreciated amount of allocable cost and b) decreased depreciation recapture when a building is later sold.
Typical Percentage of Total Cost Reclassified by Property Type
|
Property Type |
Low |
High |
|
Warehouses |
8% |
15% |
|
Office Buildings |
12% |
25% |
|
Manufacturing |
15% |
28% |
|
Groceries |
22% |
30% |
|
Apartments |
25% |
35% |
|
Medical Facilities |
25% |
35% |
|
Banks |
25% |
35% |
|
Retail Chains |
20% |
35% |
|
Auto Dealers |
25% |
35% |
|
Hotels & Resorts |
25% |
35% |
|
Restaurants |
25% |
38% |
|
Sports Facilities |
20% |
45% |
|
Leasehold Improvements |
25% |
65% |
Prather Kalman’s proven methodology, using a team of engineers, appraisers and CPAs, focuses not only on newly acquired or constructed facilities but also on all capital improvements made since 1987. Contact us to help you improve your bottom line with this powerful tax saving tool.