Cost Segregation is the method of reclassifying the components and improvements of a commercial building from a 39-year life, to a shorter depreciable life. This process allows the assets to be depreciated on a 5, 7 or 15-year schedule instead of the traditional 27.5 or 39-year depreciation schedule of real property. Thus, current taxable income will be greatly reduced and cash flow could increase by between 5% to 8% of the building’s cost.
As changes have occurred over the years, the effects of additions to the building, as well as asset “disposals” associated with the building have increased the opportunity for commercial property owners to realize a significant tax benefit.
Even if a Cost Segregation study has been done in the past, it is ABGi’s experience, things are not always correctly accounted for. This results in the Internal Revenue Service holding on to more dollars over a longer period of time.
- ABGi provides a complimentary analysis of the buildings and grounds, and identifies additional savings;
- ABGi reviews the potential savings with the company and tax professional if desired;
- Once a company elects to move forward, ABGi completes the study in 4-6 weeks;
- Documentation includes necessary adjustments to the Depreciation Schedule, the 481(a) adjustment or “catch up depreciation”, and the required Engineering report;
- Most clients see at least a 10:1 rate of return.
Cost Segregation is a way for commercial property owners to accelerate their buildings’ depreciation, saving significantly on federal taxes. Within the first five years of building ownership, a company could save up to $100,000 for every $1 million in building costs. Cost segregation has been recommended by the AICPA and many leading financial publications, including the Journal of Accountancy.
ABGi creates a cost segregation study by analyzing the building strictly within U.S. tax code guidelines. This engineering-based study provides an exact tax plan to accelerate property depreciation and write off more costs, including benefits from additions and disposals. This provides a time value of money benefit as well.
Our team of Attorneys and Engineers evaluates the property and its assets. ABGi creates a cost segregation study customized to each commercial property. If the property is depreciating on a conventional scale of 27.5 to 39.5 years, a cost segregation study can recategorize it to depreciate in 5, 7 or 15 years. By using this specific method, the study can provide informaiton on exactly how much money could be saved on taxes.
Cost Segregation Benefits
- Reduced Taxable Income – With accelerated depreciation, a commercial property owner will owe less each year on its federal taxes. Our studies help clients get the maximum tax deductions while staying on the right side of U.S. tax code.
- Increased Cash Flow – With less taxable income, a company’s cash flow increases, year after year.
- Growth – Many of our clients use their tax savings to reinvest in the business, purchase property, for expanded operations, or reduce their principle building payment.
ABGi Generates the Highest Tax Savings
ABGi is everywhere that you are. We have a nation-wide and global support network, so wherever your property is, we can come to you. We have helped property owners save on buildings in almost every industry, costing anywhere from $150,000 to $750 million. We evaluate your business from both an engineering-based standpoint and financial standpoint, while keeping in mind your facilities’ unique needs. We can give you the most accurate deduction estimate available, and we will work with your tax professional to implement it.
Have a question? We’re happy to help!