Cost Segregation surprises many people with how simple and easy it is to take control of your tax payments. Here are some questions we often run into as we work with businesses to improve their depreciation:
Cost Segregation of a 8,000 Sq Ft Restaurant
Why hasn’t my accountant mentioned Cost Segregation?
Cost Segregation is typically not a specialty of CPA’s, since it requires knowledge of structural engineering and construction costs. If your CPA has not mentioned Cost Segregation, that doesn’t mean he does not approve of it. We work with many CPA’s. Why not use our contact form to send us your company name and your cpa’s name and we will follow up for you?
How long does Cost Segregation take? What is involved?
We complete your report within 45 days. Just supply the plans, your cost basis, and current depreciation schedule(s). Cost Segregation requires no time from you or your employees.
Can Cost Segregation cause an audit?
It’s highly unlikely. Thousands of Studies are done every year. IRS personnel have verified Cost Segregation is not an audit “flag”. Also, every depreciation schedule that we issue is based on current tax law, so there is very low risk. Lastly, we will defend our work at at no cost.
Cost Segregation of a 140,000 Sq Ft Office-Warehouse
Does Cost Segregation work for buildings already owned?
Cost Segregation helps with nearly any commercial building prior to the fifteenth year of ownership. For buildings that have been owned for a while, we do “Look Back” Cost Segregation, whereby you recover all prior depreciation you missed from prior years in a one time adjustment. Often, this adjustment is very substantial.
If we do a renovation, is there any value to Cost Segregation?
Yes. Cost Segregation offers a huge benefit because it allows a current year loss for the value of the property that is torn out. That same tax loss ends up being a reduction in the cost basis of the property, thus converting more of the profit at the time of sale to a long term capital gain.
How long do we hold a property for Cost Segregation to pay off?
If the transaction is a cash sale, it should pay off after 4 years, however, this can vary depending on the type of property and the amount of depreciation that is being accelerated. In nearly every case of a property being held for 4 years or longer, however, Cost Segregation is financially beneficial.
How can Cost Segregation yield “tax savings” when it doesn’t increase total depreciation?
Cost Segregation changes when depreciation can be used. It enables accelerating depreciation into the first fifteen years of building ownership, which cuts taxes, as well. While it’s true that depreciation equals the cost of the property and no more, by getting the depreciation based tax reductions so much sooner, the property owner gets new cash for up to fifteen years, almost like an interest-free loan. If the building owner invests that extra cash, the compounded growth of the money (at just 5%) will pay all extra taxes in the later years (when depreciation is lower) and build a substantial balance of extra cash. We’ll show you how this will work for your property with our free estimate.