Cost Segregation Analysis, Massachusetts
KBKG can help you identify if you are an ideal candidate for a cost segregation study
Cost segregation is a strategic tax savings tool that allows companies and individuals based in Massachusetts, 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. In general, it is easy to identify furniture, fixtures, and equipment (FF&E) that are depreciated over 5 or 7 years for tax purposes. However, a cost segregation study goes far beyond that by dissecting construction costs that are usually depreciated over 27 ½ or 39 years. The primary goal of a cost segregation study is to identify all construction-related costs in Massachusetts that can be depreciated over 5, 7, and 15 years.
For example, 20% to 50% of the total electrical costs in most buildings can qualify as personal property (depreciated over 5 or 7 years). Reducing tax lives results in accelerated depreciation deductions, a reduced tax liability, and increased cash flow.
Walker Properties constructed a brand new office building in Massachusetts.
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.
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 all cost detail for the property including but not limited to: the general contractor's application for payment, construction invoices, change orders, depreciation schedules, and appraisals.