 |
Among the many sophisticated tax tools we use to help clients increase their
cash flow and defer federal income taxes and state income taxes are
Cost Segregation Studies. Until recently, cost segregation studies were only
applicable to large Fortune 500 companies and property owners. Today,
due to recent IRS rulings, smaller corporations and property owners can
realize significant increased cash flow by accelerating the depreciation
of real property costs and recovering unclaimed depreciation deductions.
At Piascik & Associates, headquartered in Richmond, Virginia, we've conducted
a number of Cost Segregation Studies nationwide resulting in hundreds
of thousands of dollars in client savings. Those businesses realizing
the greatest cost savings potential include:
- Apartment Complexes
- Auto Dealerships
- Restaurants
- Hospitals, Medical Centers and Nursing Homes
- Hotels
- Industrial/Manufacturing
- Office Buildings (Class A)
- Resorts
- Retail Chains, Supermarkets and Strip malls
- Recreation and Sports Facilities
How Does Cost Segregation Work and What Is it Worth?
Traditionally, owners of commercial buildings must depreciate building and structural components over a 27.5 or 39-year
period. However, using a cost segregation study, qualifying projects are identified, segregated and reclassified into
shorter depreciable tax lives of five, seven or 15 years for federal and state income tax purposes. Savings are achieved
by reducing tax liability in earlier years, thus enhancing cash flow.
The potential savings realized from a cost segregation study will vary based on a number of factors, including your
effective tax rate -- but it is not unusual to obtain savings approaching $100,000 on projects as small as $1,000,000
in total development costs.
The following table illustrates the potential benefits gained from a cost segregation study.
| Property Type |
Total Costs (in millions) |
Net Present Value of Tax Savings |
Tax Savings Years 1-5 |
| Apartment Complex |
$1.52 |
$84,039 |
$129,704 |
| Auto Dealership |
$1.64 |
$118,238 |
$141,210 |
| Manufacturing Facility |
$2.81 |
$208,136 |
$259,101 |
| Strip Shopping Center |
$2.48 |
$117,738 |
$372,425 |
| Office Building--Class A |
$3.50 |
$158,668 |
$178,303 |
- CCA Text
- Cost Segregation Checklist
- Cost Segregation Process
- Frequently Asked Questions
|
|
