How to Free Up Cash Flow Now!

What is Cost Segregation?

Cost Segregation is a process to identify personal property assets that often get buried or lumped together within the real property asset.  Our consultants reclassify those asset costs to the shortest possible depreciable life to enable the real estate owner to maximize their tax depreciation deduction, thereby reducing current income tax obligations. If you are undertaking construction, renovation or purchase of a building, you may be eligible for substantial state and federal tax savings.

Certain assets related to the project may qualify for accelerated depreciation, meaning you can take larger tax deductions over a shorter period. The benefits of larger tax deductions include increased cash flow and lower cost of capital in the first few years following a project or purchase. A cost segregation study, conducted by the qualified professionals at Mr. CostSaver can help you identify opportunities to claim accelerated depreciation. Substantial tax savings for your business may lie in the floor beneath your feet, within the walls around you or even in the shrubs outside your building.  But only a cost segregation study, performed by a qualified CPA, can tell you for sure.

Why do a "Cost Seg" Study?

A Cost Segregation Study is a strategic analysis that allows companies that have constructed, bought, expanded or remodeled real estate to increase their cash flows by accelerating depreciation-related tax deductions.  To do so, the study identified, segregates and reclassifies property costs currently being depreciated over the typical 39-year depreciable period to shorter depreciable periods of 15, 10 seven or even five years. This means you can enjoy tax deductions right now that you’d otherwise have to wait years to receive.  So you’ll not only increase the net value of current tax savings, but also boost your cash flow. 

A cost segregation study may be a particularly wise move if you’re:

• Building a new facility
• Acquiring an existing building,
• Improving, renovating or expanding an existing building, or
• Conducting leasehold improvements on your current facility. 

The analysis works most efficiently for new buildings under construction, but it can uncover retroactive deductions for older buildings as well.

Who’s involved?

A Cost Segregation Study is not a mere depreciation analysis.  It calls for far more than just classifying line items from construction invoices.  The process requires a team of experts well-versed in accounting regulations and tax laws, as well as engineering and construction principles.  Your CPA will play a starring role, quantifying building components and estimating the costs of those components under IRS guidelines.  The team may also include a contractor, engineer and architect. 

Together, they’ll analyze detailed working drawings, mechanical and electrical plans, and blueprints to segregate the structural, electrical and mechanical components from those linked to personal property.  The study will also allocate “soft costs,” such as architect and engineering fees, to all components.

How Much Can You Save?

Property owners often view building components as parts of the entire structure and depreciate everything over 39 years.  But many expenditures fall into categories with much shorter depreciable lives. For instance, you may be able to define the parking lot as 15-year property, and landscaping and shrubbery for the outside of the building as 10-year property.  You could also classify lighting and plumbing fixtures, as well as carpeting using in a new showroom, as seven-year property.  And don’t forget items such as electrical and ventilation systems, phone lines, computers and furniture, which can be classifiable as five-year property. 

Also, the current Section 179 expensing rules still apply for depreciation if you operate your business as a limited liability company and hold your building in that entity.  And perhaps best of all, the fee for the cost segregation study that brings about these savings is generally only 10% to 20% of the resulting cash flow increase.

Who Will Benefit?

• Apartment Complexes
• Automobile Dealerships
• Distribution Centers
• Fast Food Restaurants 
• Food Processing Facilities 
•  Hotels/Motels 
• Manufacturing Plants 
• Medical Centers 
• Nursing Homes 
• Office Buildings 
• Retail Chains 
• Shopping Malls 
• Sports Stadiums 
• Supermarkets
• Investment Eligibility
• All post 1986 real estate construction, building, acquisitions or improvements 
• New buildings under construction
•   Existing property constructed anytime, but placed in service after 1986 
• Purchase of existing property 
• Existing buildings undergoing renovation or expansion 
• Office leaseholds improvement and fit outs

Our dedicated Cost Segregation consultants have completed over 1,000 Cost Segregation Studies for clients throughout the United States ranging in size from a $1,000,000 facility to a $200,000,000 facility. Tax enactments in 2002 have amplified the need for Cost Segregation with the right team of qualified engineers, appraisers and CPAs.  As the tax law made the recovery period on commercial real estate and leasehold improvements to 40 years, it now becomes imperative to review your real estate to shorten the recovery life on assets buried or hidden within the building. 

If you have any further questions or would like to schedule a
Free Preliminary Consultation, please contact Mr. CostSaver using the Question Form on the right side of this page.