Cost Segregation is an analysis of property which commercial property owners can use to accelerate depreciation and reduce the amount of federal and state taxes owed. Depreciation is a deduction that real estate investors can claim on their income taxes each year to help them recover the cost of owning, operating and maintaining that property. You will reduce the amount of money you owe on your income taxes each year by using this strategy. This also reduces the expenses of owning investment real estate thereby freeing up money for other investments or property purchases.
To get the most tax savings, you should order a Cost Segregation Study during the same year after you buy, build or remodel a property. If you are just learning about Cost Segregation, and you did not perform a Cost Segregation Study when you first built, purchased or remodeled a property, a look-back study can be performed. This allows you to claim a catch-up tax deduction, which you could claim in a single year. The IRS allows you to perform a look-back study on properties that you purchased, built or remodeled as far back as January 1, 1987.
Currently, the rate of depreciation for real commercial property is 39 years. A Cost Segregation Study separates the personal property assets from the real property assets and classifies the non-structural components so that the depreciation of qualifying assets can be accelerated to five, seven or fifteen years. This IRS-sanctioned program is based on the Investment Tax Credit. It could bring a savings of more than 20% on taxes for the depreciation of the non-permanent, non-structural assets of their commercial investments.
Contact us now for more detailed information on a Cost Segregation Study for your investment properties.