Cost Segregation Services
Cost Segregation Saves Commercial Property Owners Millions
It’s Your Money. Keep More of It.
It’s Your Money. Keep More of It.
Cost Segregation is the IRS approved method of reclassifying components and improvements of your commercial building from real property to personal property. This process allows the assets to be depreciated on a 5, 7, or 15-year schedule of the traditional 27.5 or 39-year depreciation schedule of real property. Thus your current taxable income will be greatly reduced and your cash flow will increase. CSSI performs IRS defined engineering- based cost segregation studies as an essential tax savings tool for commercial property owners.
CONTACT
Regional Director, Paul E. Correa Cost Segregation Services Inc. Direct 505-271-0260 |
About Cost Segregation |
Until recently, cost segregation studies were prohibitively expensive for all but the largest commercial property owners. Over time, a small number of providers have managed to bring these within reach of owners of smaller properties. As a result, the engineered cost-segregation study is beginning to catch on, albeit slowly.
In order to take advantage of the IRS ruling, an owner must engage and apply an engineered cost-segregation study. This is the process of identifying the building components that qualify for accelerated depreciation. Depending on the type of building and its use, anywhere from 20% to 50% of the purchase, construction or leasehold improvement costs can be accelerated. Types of assets that can be reclassified include portions of electrical, plumbing and mechanical systems and numerous other components. For existing buildings, the owners accountant submit the form 3115 with the next tax return documenting the change in accounting method. Any accrued benefit is taken immediately, without having to amend previous years' returns.
The process of performing a cost-segregation study is highly technical, and there are no bright-line tests for what components can be accelerated. Internal IRS directives make it clear that only those with expertise in the various aspects of commercial construction are qualified to properly identify components and determine what depreciable life is appropriate for a given component.
The required expertise outline by the IRS includes understanding construction methods and systems, reading blueprints and engineering drawings, and knowing the relevant court cases in private-letter IRS rulings. This skill set is a blend of engineering, legal and specialized tax expertise. The IRS also strongly recommends that the study provider have an arm's length relationship with owners and their accountants.
In order to take advantage of the IRS ruling, an owner must engage and apply an engineered cost-segregation study. This is the process of identifying the building components that qualify for accelerated depreciation. Depending on the type of building and its use, anywhere from 20% to 50% of the purchase, construction or leasehold improvement costs can be accelerated. Types of assets that can be reclassified include portions of electrical, plumbing and mechanical systems and numerous other components. For existing buildings, the owners accountant submit the form 3115 with the next tax return documenting the change in accounting method. Any accrued benefit is taken immediately, without having to amend previous years' returns.
The process of performing a cost-segregation study is highly technical, and there are no bright-line tests for what components can be accelerated. Internal IRS directives make it clear that only those with expertise in the various aspects of commercial construction are qualified to properly identify components and determine what depreciable life is appropriate for a given component.
The required expertise outline by the IRS includes understanding construction methods and systems, reading blueprints and engineering drawings, and knowing the relevant court cases in private-letter IRS rulings. This skill set is a blend of engineering, legal and specialized tax expertise. The IRS also strongly recommends that the study provider have an arm's length relationship with owners and their accountants.