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Cost Segregation Studies

Increase Cash Flow in the Form of a Deferral.

A cost segregation study is a federal income tax tool that increases your near term cash flow, in the form of a deferral, by utilizing shorter recovery periods to accelerate the return on capital from your investment in property. Whether newly constructed, purchased or renovated, the components of your building may be properly classified through a cost segregation study into shorter recovery periods for computing depreciation. The study carves out (into 5, 7, and 15 year lives) certain qualifying portions of your building that are normally buried in 39 or 27.5 year categories.

Next-Generation Cost Segregation

Through our next-generation cost segregation studies, we work to uncover potential tax savings and increase cash flow through reclassification and depreciation of property. ETS provides a “Detailed Engineering” review as part of our reporting process and works seamlessly with the IRS and your CPA firm for minimal disruption to your business.

The following identifies what Engineered Tax Services will provide:

  • Free – No Risk Initial Review
  • Evaluate your current tax status and future business plans to determine the applicability of a Cost Segregation Study specifically for your project
  • Evaluate the building’s construction costs by component or systems
  • Review the project’s/facility’s construction documents, including as-built drawings and project specifications
  • Visit the facility/project to determine and identify how the components and systems are utilized – as well as to document the systems and components
  • Provide a “Detailed Engineering” review of the assets including special purpose mechanical and electrical systems, decorative finishes, site improvements, and any process related to special purpose construction
  • Classify or reclassify each building component into the appropriate tax life as prescribed by IRS guidelines
  • Identify and allocate indirect costs to each asset
  • Complete a written report with the asset detail supporting the reclassifications and completion of the necessary tax form(s)

Qualifying properties usually follow these parameters:

  • New Construction
  • Purchase or Acquisition
  • Over $500,000
  • Properties with large amounts of added features, high-end finishes, and components necessary to operate
PROPERTY TYPE RECLASSIFICATION %
Apartment Building 20-40%
Assisted Living Facility 22-45%
Auto-Car Dealership 29-35%
Bank 30-45%
Conference Center 25-35%
Fitness Center 22-45%
Golf Course 28-60%
Grocery Store 20-45%
Hospital 28-40%
Hotels 30-50%
Leasehold Improvements 18-40%
Manufacturing 30-45%
Medical Office/Clinic 22-35%
Mixed Use 18-30%
Office Building 20-30%
Research Facility 22-45%
Resort 25-45%
Restaurant 20-40%
Retail Strip Mall 18-30%
Theme Park 16-22%
Warehouse 22-40%
Winery 18-25%
Cost Segregation Video

Added Benefits of Cost Segregation

Case Studies

Recently Completed Projects

Relevant Cost Segregation Articles

  • Recognizing the Value of Next-Generation Cost Segregation Studies
    Accounting Today

    Throughout recent years, the process, application and value of cost segregation have steadily increased. How does the “old school” cost segregation study differ from the “next generation” version?

  • Conduct Due Diligence in Selecting an Engineering Tax Partner
    Accounting Today

    Two recent court cases have had a significant impact on the use of cost segregation studies in terms of reclassifying building components for accelerated depreciation.

  • Don't Miss Cost Segregation Tax Deductions
    Accounting Today

    Many CPAs who work with these types of business owners feel their clients are passive investors and cannot take advantage of cost segregation. In reality, many of these property owners can benefit from cost segregation tax savings if the accountant knows what to look for.

  • Real Estate Investment Groups Maximize Value Through Sophisticated Tax Planning
    Accounting Today

    Special tax allocations and accelerated depreciation deductions stemming from cost segregation studies are two examples of traditional tax savings strategies that are often overlooked or typically not thought to be beneficial due to the heavy concentration of tax exempt partners within the structure.

  • Don't Miss Cost Segregation Tax Deductions
    Accounting Today

    Many CPAs who work with these types of business owners feel their clients are passive investors and cannot take advantage of cost segregation. In reality, many of these property owners can benefit from cost segregation tax savings if the accountant knows what to look for.

  • Tax Synergies for CPA Clients between Small Taxpayer Safe Harbor and Cost Segregation
    Accounting Today

    CPAs can significantly help their real estate clients who don’t realize that a cost segregation can make the difference between allowing them to benefit and fall within the parameters of the Small Taxpayer Safe Harbor election.

Where Engineering & Accounting Come Together