cost SEGREGATION
Increase cash flow by accelerating depreciation benefits!
If you’ve constructed a new facility, acquired an existing facility, performed construction leasehold improvement, or renovated an existing facility you may be paying too much federal income tax. Richards, Witt and Charles, in collaboration with SourceCorp Professional Services, provides cost segregation studies to help our clients increase cash flow by accelerating depreciation expense deductions.
Performing a Cost Segregation Study:
A cost segregation study may be conducted on any building that has been placed in service since December 31, 1986, by a tax paying company that does not show an operating loss or will be profitable in the near future. Good cost segregation opportunities include:
- New construction and renovations
- Acquisitions of property
- Buildings previously placed in service without a cost segregation study that are currently depreciating entirely over 27.5 or 39 years
Cost Seg Process:
Cost segregation reclassifies the components of a building into shorter class lives. For example, a building’s floor, roof and walls might be classified as 39-year real property; site improvements such as sidewalks and landscaping would be classified as 15-year real property; communications equipment and general office furnishings as 7-year tangible personal property; and carpeting, decorative lighting and computer associated items as 5-year personal property.*
Benefits of Cost Segregation:
The benefits of cost segregation, resulting from a deferral of tax payment and accelerated depreciation, are easy to demonstrate. For each dollar that is reclassified into a 7-year class life, the taxpayer realizes from $ 0.15 to more than $0.20 in the cumulative present value of taxes deferred. Similarly, for each dollar that is reclassified into a 5-year class life, the taxpayer realizes from $.19 to more than $.23. The exact amounts depend on factors such as the tax rate, discount rate and whether the subject property qualifies for bonus depreciation. For assets newly placed in service during 2008 and 2009, 50 percent bonus depreciation applies to the shorter life property.
Call Paul Charles for a no obligation consultation to see how a cost segregation study can immediately reduce your tax liability. 516-741-0515
SourceCorp is the nation’s leading provider of specialized tax services including LIFO Accounting, R&D Tax Credit Studies, Cost Segregation Studies and §179D Energy-Efficient Commercial Building Tax Deductions.
*according to MACRS (the Modified Accelerated Cost Recovery System), case law and IRS revenue rulings. MACRS property is tangible, depreciable property as prescribed by the Tax Reform Act of 1986.
§1250=real property
§1245=personal property
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