About Cost Segregation
Cost Segregation is a commonly used strategic tax planning tool that allows companies and individuals, who have constructed, purchased, expanded, or remodeled any kind of real estate to increase cash flow by accelerating depreciation deductions and deferring federal and state income taxes.
When a property is purchased, not only does it include a building structure, but it also includes all of its interior and exterior components. On average, 20% to 40% of those components fall into tax categories that can be written off much quicker than the building structure. A Cost Segregation Study dissects the construction cost or purchase price of the property that would otherwise be depreciated over 27 ½ or 39 years. The primary goal of a cost segregation study is to identify all property-related costs that can be depreciated over 5, 7 and 15 years. For example, certain electrical outlets that are dedicated to equipment such as appliances or computers should be depreciated over 5 years.
KBKG goes beyond a traditional cost segregation study and will also separate all of the different building structural components (such as the roof, windows, or HVAC units) so when they are replaced, a loss deduction can be claimed on them. For leased property, we also separate tenant leasehold improvements.
What is involved in a Cost Segregation study?
A quality Cost Segregation Study evaluates all information including available records, inspections, and interviews, and presents the findings in a clear, well-documented format. Our process for conducting a detailed Cost Segregation includes: A review of any available cost detail for the property, a review of any available blue prints, and a physical inspection of the property. If none of this information is available, a cost segregation study can still be performed by estimating component values on site.
A Cost Segregation Study can be completed any time after the purchase, remodel, or construction of a property. However, the optimum time for a study for new owners is during the year a building is constructed, purchased, or remodeled. For investors who are in the planning phases of construction or remodeling, the best time to consider a Cost Segregation Study is before the infrastructure of the building is set. KBKG offers a free preliminary analysis that can help determine the right timing and strategy for any investor.
Cost Segregation Analysis
Please provide us with the following information, which will allow us to determine if your property will benefit from a Cost Segregation Study!
Cost Segregation Case Study
Walker Properties constructed a brand new office building in 2012. The new building has 60,000 square feet and a lot size of 220,000 square feet.
Results: Year one deductions of over $400,000. Year one increased cash flow of $170,000.
10 year sampling study with 125 locations
“Since our initial engagement with KBKG was a success, we now engage them to review our fixed asset reporting annually”
Big 5 Corporation
Cost Segregation Experts
Cost Segregation Webinars
Overview of Cost Segregation
Bonus Depreciation Update
Cost Segregation FAQs
What should I consider when selecting a cost segregation provider?
Will the company be available if I get audited by the IRS?
Does the company have tax experts that can help if my CPA has questions?
How long will it take to complete the study?
How much will a cost segregation study cost?
Cost Segregation Resources
While the opportunity to file a late partial disposition election ended for calendar year taxpayers, fiscal year-end taxpayers still have time to review depreciation schedules for these missed deductions. In the context of a building, a late partial disposition occurs generally when any building component, such …
On November 20, 2015, the IRS released Revenue Procedure 2015-56, providing certain “qualified tax payers” engaged in the trade or business of operating a retail establishment or a restaurant a safe harbor accounting method for costs incurred related to remodeling and refreshing of their “qualified …
KBKG is pleased to announce the addition of John Hanning, SCSP, to our growing team in Ohio. John is an expert in the Tangible Property Repair Regulations, Cost Segregation, Construction Tax Planning, and Fixed Asset Depreciation Reviews.
Prior to joining, John worked in KPMG’s Accounting …