Commercial property owners can utilize cost segregation services to benefit from the reduction of the tax bill that they have to pay the taxman every year. The main reason why this is a wise decision lies in the fact that the majority of commercial property owners actually overpay their federal taxes every year. This is because they are totally unaware of the existing allowable depreciation expense deductions.
Existing tax laws allow for accelerated depreciation expense deductions for all federal taxpayers. It is only on the strength of an engineering based cost segregation study that you, as a taxpayer can be able to take full advantage of the facility. If you have not yet done your cost segregation study then you are obviously loosing large amounts of money that you could be putting to good use.
What Exactly Is Cost Segregation?
Cost segregation is a study that seeks to optimize your tax benefit now through the identification, segregation, and classification of a building’s components into various asset categories that have the shortest possible lifespan. This scenario creates huge tax deductions for federal and state income tax purposes now rather than later and it all plays right into the concept of the time value of money. A dollar earned today is better than a dollar earned tomorrow.
What Goes On?
The analysis works by effecting an analysis which reclassifies components of the building in terms of lifespan from 27.5, 31.5, and 39 years to 5, 7, and 15 years respectively.
Some of the items that can be broken out and subjected to a shorter lifespan include non-structural items such as the carpeting, signage and accent lighting as well as some exterior items such as sidewalks, paving, and landscapes. This is a category that most commercial property owners can segregate without professional; assistance although the dividends are the lowest among the various categories. The categories that give you more value as a property owner include mechanical, electrical, and plumbing.
There are numerous benefits to be had from roping in a professional tax firm to assist you with a cost segregation study apart from just increasing your ROI. Find reliable tax firms and discuss your portfolio with them and see how you stand to benefit from accelerating your allowable deprivation. Never forget to check the backgrounds of the companies after compiling a shortlist from the internet.