A Cost Segregation study acts as a powerful tool for property owners, allowing them to front-load the depreciation that a property would typically receive over 27.5 or 39 years into a shorter time frame, typically 5, 7, or 15 years. This accelerated depreciation can significantly improve cash flow, providing the equivalent of an interest-free loan. By working with specialists such as professional engineers and architects who conduct thorough site visits and analyze key data including depreciation schedules, construction drawings, invoices, and change orders, a Cost Segregation study ensures accurate and comprehensive results.
The process of a Cost Segregation study follows the guidelines set by the IRS Cost Segregation Audit Techniques and the ASCSP MQS. It begins with pre-qualification and a proposal, followed by the gathering of the necessary data. Specialists then perform a comprehensive site visit and conduct an in-depth study, reviewing all findings for accuracy. Finally, a detailed report is finalized, outlining the outcomes and recommendations based on the study's findings.
To determine if your property is a suitable candidate for a Cost Segregation study, several factors should be considered. Properties placed in service since 1987 are generally eligible, with most studies focusing on the last 20 years. If your property is currently depreciating over 27.5 or 39 years and has capitalized costs of $500,000 or more, it presents an opportunity for a Cost Segregation study. Additionally, properties that have been acquired, constructed, expanded, or remodeled can benefit from this strategy.
The ideal time to conduct a Cost Segregation study is during the year the commercial property is being purchased, remodeled, or constructed. However, even if this timeframe has passed, it is still possible to perform a lookback study to correct the depreciation schedule without the need to amend returns. By exploring the possibilities of a Cost Segregation study, you can unlock potential tax benefits, improve cash flow, and enhance your company's financial position.
Contact us to discuss how a Cost Segregation study can be tailored to your specific property and financial goals. Our team of experts is ready to assist you in optimizing your tax strategies and maximizing your financial outcomes.
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