Cost Segregation - Tax Deductions
“Collecting more taxes than is absolutely necessary is legalized robbery.” - Calvin Coolidge, 13th President of the United States
In addition to the numerous tax deductions the Internal Revenue Service (IRS) allows, research indicates that most U.S. taxpayers do not claim all deductions to which they are entitled.
Some of the tax deductions business owners can claim fall under categories such as charitable contributions/donation deductions, medical and dental deductions, moving expense deductions, deducting job costs, travel and entertainment expense deductions, and casualty and theft losses, depreciation and involuntary conversion deductions.
Even after the fiscal year ends, and business owners of improved commercial real estate are still seeking tax deduction opportunities, one popular option is to order a cost segregation study (CSS). A CSS will identify any item that can be depreciated over a shorter period of time. These studies can result in accelerated depreciation deductions for properties including new buildings, renovations of existing buildings, leasehold improvements, and real estate purchase after 1986. Cost segregation allows business owners to increase depreciation, generate more tax deductions, and reduce their tax rate.
Year 1 federal income tax savings are typically at least two times the cost of a CSS. In many cases they are five to fifty times the cost of the study. The cost segregation study is only required once. Its cost is not recurring, but the benefits are recurring during the term of property ownership. A CSS can also materially reduce local property taxes by separating real and personal property for newly constructed properties.
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