Why Cost Segregation Matters
to Your Business
Tax Day has come and gone, and you’re probably already thinking of how to reduce your business’ tax obligation next year.
Cost Segregation is a valuable, often overlooked, tax strategy that can increase cash flow and reduce tax liability by reclassifying assets into shorter tax lives, thereby accelerating the tax depreciation write-off.
Cost Segregation is the process of identifying and separating construction-related personal property assets from real property assets. Personal property is considered items that are attached to the building or land but are not required for the overall basic operation of the building. While land improvements are part of real property, they have a shorter asset class life, and are often reclassified, as well.
The primary goal of a Cost Segregation Study is to identify all property-related costs that can be depreciated over 5, 7 and 15 years. A Cost Segregation Study reclassifies these assets, allowing you to depreciate them over a shorter tax life. The accelerated depreciation can benefit the bottom line of your business in a number of ways. Here are seven!
Benefits of a Cost Segregation Study
- Maximize depreciation deductions on new construction or renovations
- Optimize purchase price allocations on acquisitions of properties
- Realize immediate tax savings on demolition write offs
- Determine true insurable replacement cost after exclusions
- Establish real market value after exemptions for property tax
- Recover lost benefits from past years without amended returns
- Get big tax savings from simple design and terminology changes
What to Do Next
Paragon’s highly experienced Cost Segregation Engineers specialize in the analyses of complex mechanical and electrical systems with in-depth tax knowledge set the standard for identifying the maximum Section 1245 Personal Property supported by the current tax law. Experience confirms that accounting-based approaches only find a fraction of the qualified property by comparison, as they are limited to using only lump sum costs provided by contractors.
Ready to simplify your fixed asset management and increase tax savings?