Maximizing tax deductions, depreciation and increased cash flow can be realized by simply reclassifying and accelerating the tax depreciation of real estate assets through a cost segregation analysis. With over 20 years of experience, our engineering-based services are appropriately detailed to meet the strict guidelines of the IRS and requirements for audit defense.
What is Cost Segregation?
Cost Segregation is the systematic and comprehensive analysis of all costs associated with real estate assets, whether they are purchased, newly constructed, renovated, or qualified improvements. A Cost Segregation study enables clients to maximize federal tax depreciation benefits under the Modified Accelerated Cost Recovery System (MACRS). Any business that is required to capitalize and/or depreciate real estate project costs for United States federal income tax purposes will benefit from a Cost Segregation analysis. Cost Segregation studies have now become crucial as one can now take advantage of additional bonus depreciation benefits that are part of the Cares Act enacted in 2020.
Through a Cost Segregation analysis, qualifying assets are identified, and their cost basis segregated from the total capitalized cost of the project. To achieve this, a comprehensive and detailed analysis of construction drawings, on-site inspections, and/or conversations with the client or its representatives is completed. Once the assets are identified and their cost basis determined, they are assigned an appropriate MACRS asset class, which bears a specific depreciable class life.
A Cost Segregation can also be combined with the application of the tangible property regulations (TPR) to super-charge the allowable tax deductions. For example, TPR can allow for additional deductions for partial asset dispositions (PADs) on building renovations while a cost segregation can provide for accelerated depreciation deductions on the new replacement property.
Benefits Realized From A Cost Segregation Study
- Immediate Tax Savings – Accelerated Depreciation
- Reduced Taxable Income and Increased Cash Flow
- Present Value of Tax Savings Pays for the Study
- Comprehensive and Detailed Report that is IRS Audit Worthy
Clients Have Benefited From Cost Segregations Studies Analyses On:
- New Construction
- Asset Acquisition
- Renovations/Expansions
- Leasehold Improvements
- Retroactive Depreciation/Look-back Studies
- Insurance Replacement Cost Studies
- Replacement Cost Valuation
Qualifying Property More Than Just Wall Coverings
- Computer, telephone and cable outlets and their associated wire
- Built-in cabinetry counters and millwork
- Removable floor coverings such as carpet and vinyl composition tile
- Supplemental air conditioning systems such as those who serve computer and data server rooms
- Back-up power generators
- Kitchen sinks and plumbing systems
- Decorative lighting
- Site improvements-paving, sidewalk, curbs, signage, lighting and underground utilities such as stormwater drainage systems
Representative Engagements
- Apartment Complexes
- Assisted Living Facilities
- Automobile Dealerships
- Banks and Bank Branches
- Fitness and Athletic Centers
- Hotels and Motels
- Industrial Facilities
- Manufacturing Plants
- O?ce Buildings
- Restaurants
- Retail Centers
- Shopping Malls
- Data Centers
- Hospitals and Medical Centers
- Laboratories
- Distribution Centers
- Storage Facilities
Notable Projects
- Portfolio of more than 500 chain restaurants located across the United States and Canada, totaling more than 4 million square feet of space
- Multiple high profile, high-rise o?ice towers comprising more than 1 million square feet, including lower level retail space
- International school campus, including facility and administrative buildings, such as a theater, gymnasium, fine arts center, underground parking facilities, classrooms, science labs, an outdoor amphitheater and various site improvements
- Portfolio of 50+ economy extended-stay hotels located throughout the United States
- Silicon Valley data center
- Newly constructed, five-star luxury hotel located in Manhattan
- Portfolio of existing and newly constructed apartment complexes located throughout the United States
- Portfolio of 500+ bank branches and 20+ operations centers located throughout the United States
- Regional mall comprising over 1 million square feet with 80+ tenants including Target, Nordstrom Rack and Whole Foods
- Luxury five-star hotel located in the Grand Cayman Island
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
