If you own commercial real estate, a Cost Segregation Study Could Save you Money on your next Tax Return.
What is a cost segregation study?
Cost Segregation Studies allow you to depreciate your commercial property over a shorter period of time. The savings can be substantial.
The current depreciable life of real estate is 39 years for commercial (office, warehouse, retail, manufacturing) facilities and 27 ½ years for apartment buildings.
A cost segregation study allows taxpayers to separate different components of the total construction cost or purchase price and utilize much shorter depreciable lives for some of the following elements:
Land improvements: 15 years
Furniture and fixtures: 7 years
Machinery and equipment: 5 years
The cost segregation study identifies and substantiates the specific components that are eligible for this accelerated depreciation.
How Can You Benefit from a Cost Segregation Study?
As a property owner, you can use a cost segregation study to:
Increase cash flow through a reduction in federal income tax liability
Accelerate the depreciation of certain improvements
Write off in one year the amount of all allowable past accelerated depreciation not previously taken
Local Property Owners Can Save Millions In Taxes
Tax savings for our clients have ranged from $45,000 to over a million. The average percentage of savings for our clients ranges between 20% and 50% depending on the type of property with an average return of $15 for every $1 of study costs.
At Lanzaro CPA, we do more than merely analyze the numbers. We provide rigorous documentation that is readily supportable, expert witness testimony that communicates our findings in a clear and convincing manner, and assistance in developing and implementing strategies that have proven successful.
How Much Can You Save?
Following are some typical savings:
Type of Property
Average % of Reclassified Costs
Warehouses
15% - 20%
Apartments
20% - 25%
Retail
30% - 40%
Restaurants
30% - 40%
Banks
25% - 35%
Offices
15% - 20%
Manufacturing
35% - 45%
Grocery Stores
35% - 45%
Who Is Qualified to Perform a Cost Segregation Study?
Some property owners believe that every CPA is qualified to perform this study, but this is a misconception. To obtain the best results, the work should be performed only by a CPA who is knowledgeable about construction and experienced in conducting cost segregation studies.
To substantiate the maximum amount of deductions, it is sometimes necessary to confer with construction professionals who understand the processes and materials used for your facility. So we have assembled a team that also includes cost estimators, contractors, and engineers, who assist us when required.
Lanzaro CPA has provided services to the real estate and construction industries for over 25 years. We have experienced personnel who understand construction and know how to categorize the various components of commercial property.
