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A cost segregation study will identify items that can be properly classified as tangible personal property or land improvements, rather than real property that is depreciated over 39 years.
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To provide an UnderstandingOf
Cost SegregationAnd
It‘s Benefits
Goals of this Presentation:
Tax Solutions & Relief
The IRS approved method of reclassifying building components for Commercial and Residential Rental properties resulting in substantial tax savings for the property owner.
What is Cost Segregation?
Cost Segregation Is:
Tax Solutions & Relief
The US Treasury Department States:
“Cost Segregation is a lucrative tax strategy that should be used in almost every major
purchase of Commercial Real Estate.”
Tax Solutions & Relief
A cost segregation study is an in‐depth analysis of the cost incurred to build, acquire or renovate a real estate holding.
The primary goal is to identify all construction related costs that qualify for accelerated income tax depreciation.
A true engineering based cost segregation study will identify and assign costs to all building components including those in the long life 39 year depreciation category.
Cost Segregation Defined:
Tax Solutions & Relief
Cost Segregation BreakdownBefore After
39 years*
5 Years
7 Years
15 years
39 years*
* 39 Years for Commercial Property and/or 27.5 Years for Residential Rental Property
S1245Personal Property
200%DBDouble Declining Balance Method
Land Improvements150% DB
S1250 Real PropertyStraight Line
Class
Segregate
Tax Solutions & Relief
Types of Components We Segregate and Reclassify In Our Studies:
• Communication Systems • Transformers • Hospitality Fixtures • TV Outlets & Wiring • Distribution Panels • Distribution Wiring • High Voltage Switchgear • Data Jacks • Miscellaneous Outlets • Emergency Power • Computer Data / Power • Supply / Exhaust –
Kitchens • Removable HVAC
Systems • Environ. Control –
Computer • Environ. Control –
Communications • Specialized Fire
Protection Systems • Specialized Air Filtration /
• Waste Interceptors • Security Access &
Monitoring Systems • Conduit / Wiring to
Special Systems • Flex Space • Demountable Power
Systems • Shower / Deluge Fixtures,
Supply & Waste • Specialty Gas /
Compressed Air Systems • Millwork • Floor Coverings • Window Treatments • Wall Coverings • Demountable Walls • Decorative Lighting • Signage • Sidewalk & Curbing • Parking Lots & Curbing • Site Utilities
• Fencing • Specific-Use Structures
Foundations • Mezzanines • Stairs • Platforms • Structural Steel • Task Lighting • Vents • Beams • Columns • Gas, Vacuum,
Compressed • Exhaust Systems • Audio / Visual Systems • Buss Ducts • Neutralization Basins • Humidity / Temp. Control • Site Utilities • Sewer & Drainage
Systems • Outdoor Lighting
“Our engineers look beyond the obvious items and evaluate every single key component associated with a property.”
Tax
Solutions
&
Relief
How Can I Benefit From Cost Segregation?If you own commercial and/or residential rental property cost segregation can provide significant tax benefits by utilizing shorter depreciation recovery periods.
By following IRS guidelines for Engineering-based Cost Segregation our engineers are able to reclassify assets classified as 1250 long-life property to the more rapidly depreciating 1245 property and land improvements.
This reclassification results in substantial cash flow benefits in both current and future years through substantially shorter depreciable tax lives and accelerated depreciation methods.
Tax Solutions & Relief
A commercial real estate owner purchases a Mixed Use property for $2.5M.
Let’s Look at an Example:
Land, which is not depreciable, must be subtracted from the Purchase Price.In this case we will subtract 20% or $500,000 for Land.
The tax benefit for someone paying 35% Federal and 5% State taxes would be:
$20,513
What is being depreciated each year Without Cost Segregation?$2 Million / 39 Years
$51,282
Tax Solutions & Relief
How can you as the property owner find out how much Tax Savings you can benefit from this?It’s as easy four simple steps!
The Property Owner Fills out a Pre-Qualification Form
And Provides:
Closing Statement – If Available
Recent Appraisal – If Available
Depreciation Schedule – If Applicable
Tax Solutions & Relief
Your Mixed Use building cost basis (not including land) is $2,000,000 and was put into service in 2009. The expected benefit range is:
TABLE OF BENEFITS
Tax Year Additional Depreciation Expected Cash Benefit
2009 $53,872 to $67,333 $21,549 to $26,9332010 $86,244 to $108,067 $34,497 to $43,2272011 $51,634 to $65,207 $20,653 to $26,0832012 $30,476 to $38,931 $12,190 to $15,5722013 $29,398 to $37,391 $11,759 to $14,9562014 $13,442 to $17,559 $5,377 to $7,023
Total yrs 1-6 $265,064 to $334,487 $106,025 to $133,795
PROFESSIONAL FEES & ROI
Item Charges & ROI
Total Professional Fees $10,000 NET After Tax Fees $6,000
Anticipated ROI 17.7 : 1 to22.3 : 1
Tax Savings & Relief Provides Cost / Benefit Analysis:
Tax Solutions & Relief
Additional Depreciation: Actual vs. EstimateTax Year Estimate Actual
2009 $ 53,872 to $ 64,646 $67,333 2010 $ 86,244 to $103,493 $108,067 2011 $ 51,634 to $ 61,961 $65,207 2012 $ 30,476 to $ 36,571 $38,931 2013 $ 29,398 to $ 35,278 $37,391 2014 $ 13,442 to $ 16,130 $17,559
Total thru 2014 $265,066 to $318,078 $334,487
BEFORE
39 Year
16% 0%
10%
74%
AFTER5 Year
7 Year
Cost Segregation Results
Additional Tax Savings
$133,795
100%
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$180,000
2009 2011
2013
2015
2017
2019
2021
2023
2025
2027
2029
2031
2033
2035
2037
2039
2041
2043
2045
2047
Savings Graph:
What could you do with an additional $133,795 over the next six years?
It Seems Too Good to be TRUE!
Engineer Performed Cost Segregation is the IRS recommended and preferred method for conducting Cost Segregation. Visit the www.irs.gov website and search Cost Segregation and you will see it is a normal and standard procedure.
Will it raise Red Flags and Cause an Audit? NO!
AICPA – American Institute of Certified Public AccountantsIRS – Internal Revenue ServiceUS Treasury Department
Cost Segregation is Recommended By:
We support our findings at no additional charge to our clients.
Tax Solutions & Relief
Why Hasn’t My CPA Told Me About This?
Most CPA Firms do not have the Engineers on staff to Perform Cost Segregation Studies.
We work with CPA’s every day to provide the Engineering Resources and Documentation Necessary so they can provide this Valuable Service to their Clients.
Cost Segregation is a specialty service in which the EngineersMust Know how to read and dissect Architectural and Engineering Drawings, know the Tax Law associated with BuildingComponents, and know what to Look For and Document whilePhysically Inspecting each and every Property.
Tax Solutions & Relief
Does the building have an adjusted cost basis of $750,000 or greater?
Does the owner operate as a For‐Profit Entity and pay Federal income taxes?
Does the owner plan to hold the property for one year or longer?
Cost Segregation Requirements:
Tax Solutions & Relief
We provide a free Cost-Benefit Analysis for each and every property.
In the analysis we will provide our flat fee to complete the study along with a conservative estimate of benefits.
This provides the owner the ability to make an educated decision whether or not to go forward with the study based upon the anticipated return on investment.
No Cost, No Obligation Cost-Benefit Analysis
Tax Solutions & Relief
Why provide the Federal Government with an Interest Free Loan for the remaining 39 years of your
buildings’ depreciable life?
OR
YourselfIRS
It Is Really Your Choice:
You Can$PAY$ the:
Tax Solutions & Relief
Please Contact us today for Your Free Cost-Benefit Analysis!
Richard Geib941-840-1069
Tax Solutions & Relief
