Minimizing your taxes by finding value in the property you own
Business owners in Kansas, Arkansas and throughout the U.S. looking to minimize their taxes often can find value in the buildings they own.
What is a Cost Segregation Study?
A cost segregation study uncovers a building’s value by identifying the parts of a building that can be reclassified as personal property for tax reporting purposes. This study separates assets into several categories, including:
Building components that are considered personal property or land improvements under the federal tax code often are subject to shorter depreciation periods, enabling owners to reduce current income taxes, improving cash flow.
For example, certain improvements like removable flooring, parking lots, and plumbing and electrical upgrades installed specifically for personal property used in your business depreciate over a much shorter period than does the building itself. As the owner, you can recover the value of those items over five, seven or 15 years, whereas the building depreciation stretches over 27.5 or 39 years. Moreover, for property with a life of less than 20 years, 100% bonus depreciation deductions now apply to new and used property. The tax savings can be significant!
Only a cost segregation study can enable you to uncover that value in your building and start saving on your taxes.
A CLIENT’S PERSPECTIVE…
“The Adams Brown team are saints. I am a challenging client with unique needs requiring additional help and patience. Yet, I am always greeted with a comforting smile.”
Cindy Howard, Garjer, LLC, Wichita, KS
Advantages of Cost Segregation
Advantages of cost segregationinclude the value of front-loaded depreciation deductions (which improves cash flow when you need it most because you just built or made improvements), write-offs of building components that need replacement and lower real estate taxes. If you’re currently planning on new construction or a remodel, it’s important to consider the tax impacts and let your contractor know what information you’ll need for the cost segregation study.
Cost segregation can be performed to identify components of property, such as the roof, HVAC equipment or plumbing, enabling owners to know the original costs assigned to these units when they have to be replaced, easing the write-off process.
By accelerating depreciation, you’re reducing tax liability and leaving cash in your pocket to use for paying down debt, new ventures, additional improvements and more. A cost segregation study gives you the time value of your money.
Who Qualifies for this Tax Saving Strategy?
Owners of commercial property valued at $450,000 or more and residential real estate property valued at $125,000 or more are often candidates for cost segregation studies.