Owning commercial property can be a lucrative way to generate and secure wealth for generations to come. It can, however, tie up a good deal of money and negatively impact your cash flow. Commercial buildings, like offices and warehouses, depreciate over 39 years, and residential rental properties over 27.5 years, tying up your investment for decades.
Would you like to defer your federal and state tax liability on your real estate investments? Are you interested in increasing your cash flow and accumulating more wealth? Have you recently expanded or remodeled properties that you own?
A cost segregation study could be the answer. All properties are comprised of more than the building itself and include components that can be depreciated more rapidly. Identifying the non-structural parts of real property – such as roofing, HVAC units, appliances, flooring, land improvements, etc. – and writing them off over a shorter period can create significant tax savings. Depending on the type of building you own, a cost segregation study can produce additional cash flow as high as $100,000 for every million dollars of real property.
What types of buildings qualify?
The best candidates are owners of commercial or residential rental property purchased after 1986 that cost more than $750,000 (excluding land), and those who have spent more than $100,000 on improvements to their properties. You may also benefit if you have constructed a new commercial building or residential rental unit and remodeled, renovated, or expanded existing buildings.
What to expect during a cost segregation study
A typical study normally takes between 30 and 60 days to complete and includes:
- Data Collection
A feasibility study is performed to outline your potential tax savings and create a proposal for the cost of the work.
- Site Visit
Members of our specially-trained team will visit your property and create a detailed report of their findings.
Based on the results of our site visit, we will create new depreciation schedules and prepare all the necessary tax forms.
Once complete, you will receive a detailed report of our results and a member of our team will walk you through its implications and the savings you will realize.