Discover Valuable Renovation Write-Offs with a Fixed Asset Retirement Study
We’ve discussed before how Tax Engineering before a renovation can help you maximize your deductions without sacrificing your building’s design integrity. Tax Engineering makes it clear how you can optimize the use of personal or removable assets in your building to cash in on tax savings immediately and for years to come.
But forward planning is only one part of the tax-savings equation during a renovation. Many property investors don’t know that they can also claim extensive tax write-offs from materials discarded during a renovation.
Learn how you can increase your tax benefits to help finance your renovation project with a Fixed Asset Retirement Study.
What Is a Fixed Asset Retirement Study?
You can think of a Fixed Asset Retirement Study as retrospective Tax Engineering. A team of tax experts and engineers will work together to help you understand how to claim the tax write-offs you deserve by identifying, valuing, and depreciating the personal property assets you intend to discard during your renovation.
Before you remove and throw away your ceilings, walls, flooring, light fixtures, wall coverings, ductwork, wiring, plumbing, and other materials, take the time to perform a Retirement Study for these fixed assets. Find out how much cash is in your trash.
Why Choose Paragon International for Your Retirement Study?
Few firms engage in Retirement Studies for Fixed Assets because these studies require a deep understanding of how to correctly apply the IRS’s final Tangible Property Regulations. These Regulations are extremely complex.
Good to Know: The IRS’s Tangible Property Regulations (TPR) were finalized in 2013 after decades of conflicting court rulings regarding which business expenses are deductible and which must be capitalized. The complexity arises from the interplay between a Unit of Property (UoP) and its 9 key building systems including plumbing, electrical, HVAC, security, elevator, and others. It takes an expert to see the tax impacts in how these work together.
To perform your Fixed Asset Retirement Study, the tax experts and engineers at Paragon International will work together to:
- Identify often unknown and unreported UoP dispositions
- Measure the quantities and extent of the identified and disposed UoP components
- Conduct retrospective appraisals to determine the relative Fair Market Value of acquired components
- Apply TPR-designated and -approved valuation methodologies to reallocate the original basis
- Determine the accumulated depreciation through the disposal date
- Determine the current Net Book Value (NBV) tax basis for write-offs
- Create detailed work papers and IRS audit documentation as supporting evidence
This comprehensive, end-to-end process leaves no stone unturned, giving you the information and audit documentation you need to maximize your tax write-offs and reduce your overall renovation costs.
Would a Retirement Study Reduce Your Final Renovation Costs?
If you have previously performed a cost segregation study, you probably have a good idea of your baseline tax basis for the personal property you intend to dispose of or replace during your renovation. You can also use a cost segregation calculator to estimate these numbers. Understanding these basic numbers can give you an initial idea – but you may be surprised at the tax write-offs that a retirement study can find.
When one of Paragon’s clients completed their large corporate headquarters, a previous accounting firm’s cost segregation study found a mere 12% of the $200 million cost as personal property. A few years later, Paragon’s engineering-based Cost Segregation Look Back Study found 28% as personal property. Without this study, the client would have missed out on a significant IRS refund of the +16% they deserved and received. This also created a highly detailed basis for tax write-offs from materials discarded during subsequent renovations.
Serving clients since 1985, Paragon International, Inc. provides independent, impartial and accurate cost segregation analyses, and property valuations and appraisals to assist in and support decisions related to taxes, risk management, investment, financing and corporate planning. Our consultants have extensive fixed asset experience – they’re fixed asset experts. Because of that we are able to offer a unique combination of irreplaceable human resources and advanced technology. We have specialists experienced in valuing closely-held securities, patents and other intangible assets, business enterprises, buildings, equipment and real estate. In addition, Paragon provides complete inventory and asset management services and solutions, including software customization and training, barcode labels and scanners, and tailored inventory services such as data conversion and integration, asset inventories, asset policies, cost reconciliation, and appraisal services. Contact Paragon International to discover how we can help you.