Cost Segregation Before April 15 Means Paying Less Taxes for 2009

As the tax deadline quickly approaches, companies are trying to identify every legitimate deduction possible to reduce what they pay in federal income taxes. One large deduction often overlooked is the proper depreciation in their real estate holdings.

One popular option to identify depreciation amounts is to conduct a cost segregation study. Cost segregation will identify any item that can be depreciated over a shorter period of time. These studies can result in additional depreciation for properties including new buildings, renovations of existing buildings, leasehold improvements and commercial real estate purchases after 1986. Cost segregation allows business owners to increase depreciation and generate more tax deductions.

Cost segregation involves separating up to 135 components of real estate that depreciate faster than the building itself. Taxpayers can depreciate many components of real estate using a five-, seven-, or 15-year recovery period. Within permissible bounds, there is a huge tax savings opportunity for depreciating this property accurately. Examples of these categories include items such as carpeting, certain fixtures, window treatments, site improvements and some wall coverings.

Cost segregation typically apportions about 20% to 40% of the improvement cost basis to short-life property. Short-life property depreciates over a shorter life period and provides a higher level of tax deductions annually during the first 15 years of ownership. Most business owners increase depreciation by 50% to 75% by obtaining a cost segregation analysis.

You can get a cost segregation study, or preliminary report which will help you decide to postpone filings or not, in time for tax filing deadline. Contact a cost segregation provider today to find out more.