Cost Segregation - A powerful IRS provision for commercial real estate owners
Engineering based cost segregation studies permit commercial real estate owners to reclassify certain components of real property into more rapidly depreciating personal property. This reclassification results in significant cash flow benefits in both present and future years through considerably shorter depreciable tax life and accelerated depreciation methods.
History of the Program
In 1997 a landmark tax court case, Hospital Corporation of America v. Commissioner, the US Tax Court ruled in favor of the application of engineering-based cost segregation as a viable method to differentiate real and personal property under existing law.In 2004 the IRS released the Cost Segregation Audit Techniques Guide, making clear the expected process of performing a successful Cost Segregation Study. This opened the doors for many small and midsize companies to begin taking advantage of what was previously only pursued by larger companies.
“…Cost Segregation Studies should be performed by qualified individuals or firms such as those employing personnel competent in design, construction, auditing, and estimating procedures relating to building construction.” -U.S. Internal Revenue Service
Typical impact of Cost Segregation Study on cash flow by business type
Who Qualifies for Cost Segregation?
Any commercial property owner who has done the following since 1987:
- Purchased a commercial building or facility
- Constructed a new commercial building
- Renovated, remodeled, restored or expanded an existing facility
- Paid for facility leasehold improvements
What are the Benefits of a Cost Segregation Study?
According to the U.S. Treasury Department, “Cost Segregation Studies are a lucrative tax strategy that should be considered in almost every real estate purchase.”
An average Cost Segregation Study offers approximately $150,000 in additional depreciation per $1 million dollars in purchase or construction cost over the normal 39 year straight line method.
“Cost Segregation Studies are a lucrative tax strategy that should be considered in almost every real estate purchase.” -U.S. Treasury
Ascend Revenue utilizes a team of highly qualified professionals, strictly adhering to the IRS recognized Detailed Engineering Approach to perform all Cost Segregation Studies. This methodology maximizes benefits and assures that IRS guidelines are strictly followed.
An initial consultation and a brief feasibility report allows our professionals to evaluate your current tax & depreciation status. We will determine the cash flow and net present value (NPV) benefits for your business, and work with you and your CPA to determine if a Cost Segregation Study is the right call for you.
The initial consultation is a simple and quick process. To schedule your consultation, please contact us.