What Is Cost Segregation?
Cost segregation accounting is a strategic tax planning resource that allows individuals and companies that have purchased, constructed, remodeled or expanded any form of real estate to increase their cash flow by accelerating their deductions on depreciation and deferring state and federal taxes.
When you purchase real estate, not only does the property include a building structure but also internal and external components. On average, about 20% – 40% of these components fall into a tax category that can be written off faster than the building’s main structure. A cost segregation study, therefore, dissects the purchase price or the construction cost of the property to identify these components that would otherwise have been depreciated over the normal 27.5 years for residential properties and 39 years for commercial properties. The depreciation period for these assets is much lower at 5 – 15 years and a cost segregation analysis identifies all these costs so as to free up substantial cash flow.
The Karla Dennis And Associates, Inc.™ Difference
Karla Dennis And Associates, Inc.™ goes beyond the traditional cost segregation study. Our unique approach to strategic cost segregation employs structural, architectural, and civil engineering knowledge and experience in tax law to identify the components in your property that qualify for accelerated tax depreciation.
Our unique blend of tax code and engineering expertise adds value to any cost segregation project. Our professionals visit buildings for inspection, study the elements and classify them accordingly. All this is documented to help with your depreciation claim.
What is the right time to conduct a cost segregation study?
Cost segregation studies can be done any time after the construction, purchase, or remodel of a property. The best time to perform this analysis for new owners, however, is within the first year of constructing, purchasing or remodeling the property. For the investors who are planning to construct or remodel a building, the best time to conduct a cost segregation analysis is before infrastructure is set. Karla Dennis And Associates, Inc.™ offers preliminary analysis to determine the right time and strategy for a cost segregation study.
The Benefits of Cost Segregation
Most individuals and companies are usually surprised to discover the significant tax saving that a cost segregation analysis offers. Below are some of the most prominent benefits of the study:
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