Cost Segregation

Cost Segregation is the process of identifying personal property and other, short-lived assets that are grouped with real property assets, then separating them out for tax reporting purposes to maximize your tax deductions.  

Cost Segregation:

• Opportunity to reduce federal income taxes by accelerated depreciation methods.
  Process of identifying personal property and other short-lived assets from the cost of new construction or acquired properties.  
• Buildings and leasehold improvements are normally depreciated over 39 years for federal tax purposes.  
• A cost segregation analysis can reclassify 20 percent to 40 percent of a building’s value to personal property with a 5, 7 or 15 year depreciation life.  
• Reducing tax “lives” enables you to accelerate depreciation deductions, reduce your tax liability, and improve cash flow.
• You may realize the savings without having to amend any tax returns.

Fixed Asset Review:

• A comprehensive review to analyze a company’s current fixed asset policies and procedures and identify significant recurring tax savings.  
• We focus on the entire asset life cycle to accelerate deductions in the following areas:
  • Repair & Maintenance – Review historical capitalized assets to re-characterize qualified costs as incidental repair and maintenance costs, which are deductible as ordinary and necessary expenses. Examples include HVAC repairs, painting and roof repairs.
  • Remodel / Renovations – Review remodeling costs to real and personal property to determine whether historically capitalized costs should be treated as incidental business expenses and immediately deducted.  
  • Removal Cost Analysis – A review of all assets to determine whether historically capitalized costs involved in the removal of property may be deductible as moving or relocation costs.
  • Placed in Service Issues – Review of construction work-in-progress and fixed asset additions to ascertain whether certain projects or assets could be “placed in service” in an earlier tax year. Major project or asset additions are analyzed in relation to the supporting purchase contracts and invoices to determine whether an asset is ready and available for its specifically assigned purpose under Treasury Reg. §1.167(a)-11(e)(1).  
  • Energy Efficiency Deductions – An immediate deduction is available for costs of installing certain energy efficient building systems in commercial buildings. Qualifying energy efficient systems include lighting systems, HVAC, hot water systems and portions of the building envelope. The deduction is for the cost of the qualifying energy efficient property equal to $1.80 times the square footage of the building.

Preliminary Review at No Charge:

• We begin our review by conducting a preliminary analysis at no charge to you, reviewing the most recent tax depreciation schedule as of December 31, 2007. 
• From this data we will review your current fixed asset mix and prior depreciation methods and project a minimum benefit that will be achieved under a full analysis.