If you want the best possible ability to receive full tax benefits from your properties, then you’re going to want to understand and take full advantage of Cost Segregation. At the most basic level, Cost Segregation can be described as “asset evaluation”. You’re basically taking inventory of your assets, identifying exactly what those things are, calculating their value and organizing them into different asset classes. The following are some of the most significant ways that you can benefit from the possibilities that Cost Segregation creates.
Simply by assigning new asset classes, Cost Segregation can give you the ability to depreciate certain properties at the fastest possible rate of time permissible.
By using a Cost Segregation study to expedite the rate of allowance received for a property’s gradual deterioration, it’s possible to immediately experience a rise in cash flow. What may have had a rate of depreciation of 39 years, such as a commercial building, can instead be given a new depreciation rate of 15 years due to its reclassification as land improvement.
Cost Segregation can potentially help you reduce your level of tax liability for any properties you currently own that can be reclassified. You might even potentially be able to retroactively benefit from any tax deductions that were “unclaimed” prior to the new asset classification. By carrying out the Cost Segregation study, you take stock of any latent opportunities for deferrals, liability cuts, deductions and profitable cash flow spikes that may have otherwise gone completely unnoticed.
While the fullest extent of benefits from a Cost Segregation study is easy to see, IRS regulation terms for these studies can be notoriously strict. It’s important to have a professional with the right level of expertise to survey and provide information with the highest level of precision possible.
Please contact us if we can be of assistance with this or other tax planning matters.