Tax Expert, Julio Gonzalez, Will Speak About Tax Reform’s Impact on Real Estate

Tax expert and CEO of Engineered Tax Services will guide leaders in the South Florida real estate community through tax reform’s impacts. This is an exclusive presentation hosted by Douglas Elliman Development Marketing. Julio is a trusted member of the Forbes Finance Council and an expert on real estate investing.

“I look forward to sharing the effects of the new tax reform with fellow real estate investors to help them understand the benefits. People are leaving their homes and businesses in the Midwest and Northeast, and anyone in the Florida real estate industry has much to gain from this,” said Mr. Gonzalez.

The recent federal tax structures that were signed in to law by Trump are driving people to Florida. Because of the fact that Florida has no state income tax, and northern states have to deal with limiting state and local tax deductions, the real estate benefits are crystal clear. Florida is already a destination for “snow birds” and retirees, so, the new tax law is rather encouraging for these retirees to make Florida their permanent state of residence. This is huge for real estate agents, investors, and buyers.

“These new, permanent residents will benefit from the latest perks – rather than be ‘punished’ by the new law that many of their prior states of residence are now dealing with. This could cause major havoc on the cities and states that these new Floridians (many in the top 1 percent) are leaving,” said Mr. Gonzalez.

Meanwhile, economic and real estate professionals in Palm Beach County and beyond are having an exceptional time with recruiting new Florida residents.

“It’s a no-brainer. For example, New York taxes the wealthy, and Palm Beach is basically rolling out the red carpet of real estate benefits,” said Mr. Gonzalez.

To register for the event, click here: https://www.3550southocean.com/eblasts/2018/0131-julio/index.html. For more information about tax reform’s impact on real estate, please contact Engineered Tax Services at (800) 236-6519.

President Trump signed into law a package of tax extenders included in the Bipartisan Budget Act of 2018

On February 9, 2018, President Trump signed into law a package of tax extenders included in the Bipartisan Budget Act of 2018. The package includes an extension of over 30 tax incentives including retroactive extensions for 179D energy efficient building deduction, and the 45L tax credit for residential and multi-family units. These extensions maintain the existing qualifying standards from prior years and extend the incentives to properties and improvements placed-in-service through December 31, 2017 (formerly December 31, 2016).

This extension means that we have a short window to perform certifications so eligible businesses can capture these benefits prior to filing the 2017 tax returns!

179D Energy Efficient Building Deduction is defined as:

  • Any Commercial Property or 4+ Story Multi-Family Property
  • Newly Constructed prior to December 31, 2017
  • Or with retrofits to Lighting, HVAC, or Envelope components resulting in reduced energy consumption
  • Eligible Properties Qualify for up to $1.80 per square foot OR
  • $0.60 for lighting, $0.60 for HVAC, $0.60 for Envelope Retrofits

45L Residential Energy Efficient Housing Credit

  • Single-Family or Multi-Family Less than 3 Stories
  • $2,000 tax credit per unit
  • New Construction or Major Renovation

If you have qualifying properties and need a proposal, benefit analysis and certification, please contact Engineered Tax Services right away. CLICK HERE for a project request list to complete for a proposal on your 2017 projects!

For more information please contact your Director or Engineered Tax Services at info@engineeredtaxservices.com

Can Cost Segregation Benefit Your Franchise?

Franchisors like hotels, restaurants, automotive services, retail stores, and more could be missing major tax benefits if they are not taking advantage of a cost segregation study. In addition to franchises, any business involving real estate holdings can also take advantage of the benefits resulting from a cost segregation study. A cost segregation study performed by Engineered Tax Services can enable commercial property owners to defer thousands, or even hundreds of thousands of dollars in income taxes.

Many franchisors, who create property themselves, are learning that they can increase profitability and even create another location, or multiple locations, simply by having a cost segregation study done on their property or properties. They are able to see the benefits of the study on their tax returns, and these benefits allow them to invest in equipment, improvements, hiring new employees, purchasing new property, and more. Here are some tips to understand if your franchise, property, or business is eligible for a cost segregation study.

What are the Qualifiers?

The first identifier to qualify for a cost segregation study is the fact that the cost basis of the property will be placed on the books for depreciation. Any property, which is being or will be depreciated, qualifies for a cost segregation study. Whether this is a large corporation franchise business – owning multiple facilities or properties, or personal business – such as a rental home, they can all take advantage of the benefits derived from a cost segregation study

Common Misconception and Bonus Depreciation

Cost segregation is a benefit that is based on the amount of tax basis invested in real estate property. A common misconception is that real estate properties under $1M have a smaller tax basis and would not benefit from cost segregation, due to the belief that the fees for the study would outweigh the benefit. However, that is not always the case. Properties ranging from $500K and under to $50M or more have benefited from cost segregation. This is because the smaller properties do not only benefit from accelerated depreciation, but also from bonus depreciation, repairs and maintenance expenditures, and partial asset dispositions. These studies not only serve the current year tax filings, but also set the path for accuracy on the depreciation schedule and how to properly handle assets in the future.

Tenant Improvements

The same circumstances apply even in a small tenant improvement with bonus depreciation and new assets. There is quite a bit that can be written off to validate the benefit from the study. This is especially true if there is demolition work of old assets, which will result in partial asset dispositions, as well as potential repairs or routine maintenance expenditures.

Common Misconception and Land Improvements

Another misconception surrounding properties that do not have a lot of personal property in them, with very little interior build out such as industrial warehouses, will not benefit from a cost segregation study. However, there is still a benefit to have a study done because those properties generally have a lot of land improvements that qualify for accelerated depreciation. They may also have certain portions of electrical, mechanical, and plumbing that can also qualify. This kind of study can pay greatly in the first year, but the ability to identify those dispositions, repairs, and maintenance, can be an added value. Also, the minimizing of the recapture through the proper retirement of assets is also a valuable benefit.

Recapture and Cost Segregation

Upon the sale of a business property, personal property, and land improvements identified through cost segregation are disposed of at net tax book value. Subsequently, there are neither gains nor losses associated with the disposal of these corresponding assets. All resulting gains on the sale of the associated structure and land will be will taxed at a preferential capital rate.

Length of Ownership and Minimizing Recapture

If a property is purchased with the intention to flip it or own it for a short period of time (less than a year), a cost segregation study may not be meaningful. However, cost segregation experts at Engineered Tax Services can access your situation on a case by case basis.

Recently Sold Properties

If a property or franchise has already been sold, there is still a window of opportunity to capture a benefit. A recently sold property may still be a good candidate for cost segregation as long as you sold the building and have not filed the current year’s tax return. If this is the case, there is an opportunity to do a cost segregation study and begin maximizing tax deductions at ordinary tax rates.

For a consultation, please contact Engineered Tax Services at (800) 236-6519.

Cost Segregation Can Benefit Your Self-Storage Facility

If you are a self-storage owner, cost segregation is a vital tax tool that you can take advantage of today. A cost segregation study has the potential to put more money in your pocket than most other business tools. The Engineered Tax Services team has helped hundreds of self-storage facility owners increase their cash-flow by accelerating depreciation through cost segregation studies.

It can benefit self-storage facilities in several different ways. When a cost segregation study is performed, it identifies all building components and site improvements qualifying for accelerated depreciation. Cost segregation can help lower property and insurance premiums, as well as real estate tax bills. Another great benefit is that a cost segregation study ensures accurate identification of assets in the case of theft or fire.

What is a Cost Segregation Study?

A cost segregation study is a cash-flow strategy to uncover potential tax savings through the reclassification and depreciation of property – such as a self-storage facility. It is a federal income tax tool that utilizes shorter recovery periods to accelerate the return on capital from property investments. Whether newly constructed, purchased, or renovated, the components of your building may be properly classified into these shorter recovery periods for computing depreciation. The study carves out certain qualifying portions of your building into 5, 7, and 15-year class lives that are normally buried in 27.5 or 39-year class life categories. A cost segregation study is not only beneficial for newly constructed buildings but can also uncover significant tax benefits for older buildings due to catch-up depreciation.

How Engineered Tax Services Does It

An example of how Engineered Tax Services has saved self-storage facility owners thousands of dollars with a cost segregation study is when the qualified engineering team performed a study and review of a 46,400-sq. ft. storage facility and 62,000 sq. ft. parking lot in Hobe Sound, Florida. The benefit from this ended up being a combined 29.08% reclassification of 39-year depreciation class life assets in to 5 and 15-year class lives – resulting in an accelerated benefit of $837,879.33 in total realized tax savings.

Request a Free Benefit Analysis to identify an estimated benefit and ensure a cost segregation study makes sense for your self-storage business.

To learn more about cost segregation studies, call Engineered Tax Services at (800) 236-6519 or visit our cost segregation page for more information.

Can You be Taking Advantage of the R&D Tax Credit with the Internal Use Software Opportunity?

When a company develops software for general and administrative functions, such as for financial management, human resources, or support services, that software needs to be considered innovative in order to qualify for the R&D Tax Credit. This innovation test is a high threshold in order to qualify for the credit. For example, these types of software cannot be commercially available in order to qualify.

However, there are two typical situations when software developed for a company’s operations does not need to be considered innovative in order to qualify for the R&D Tax Credit and, as a result, will very likely qualify for the credit.

First, when the software is developed to facilitate the viability of business interactions with third parties, such as executing banking transactions or tracking deliveries. And, second, when the software is developed to function as a software portal that enables third parties to execute actions on the taxpayers’ software system. You see this a lot nowadays with all types of companies, from banks and brokerage firms to retailers that have functional websites and phone apps that interface with their clients and customers.

The development of the underlying software for these websites and apps will very likely qualify for the R&D Tax Credit – an often-overlooked opportunity. If you think this could apply to your company or to your clients, please contact Engineered Tax Services at (800) 236-6519 for a free assessment.

Cost Segregation ROI

Congress Passes Budget Deal: Three Things You Need to Know

The United States Chamber reported today that Congress finally passed the Bipartisan Budget Act. They added that there are three important things everyone should know:
1. Congress Just Crossed-Off a Large Part of Its “To-Do” List.
Items included in the agreement:
  • Budget Caps Deal for Fiscal Years 2018 and 2019 (including $20 billion set-aside for infrastructure)
  • Debt Limit Suspension Into 2019
  • Disaster Funding (Hurricanes, California Wildfires)
  • Tax Extenders (including energy sections 179D and 45L)
  • Healthcare and Medicare Extenders (and a repeal of the Independent Payment Advisory Board (IPAB)
2. The Number of “Must-Pass” Vehicles Between Now and September 30th(End of the Fiscal Year) Is Now Very Small.
Congress gets most of its work done when they are up against the deadline for “must-pass” legislation (like avoiding a government shutdown). With enactment of the Bipartisan Budget Act, there are much fewer “must-pass” items left this year. Those that remain include:
  • Expiration of the current continuing resolution (CR) on March 23, 2018.
    • Congress must act again to keep the government open. An omnibus spending bill is expected which will require bipartisan support in the House and Senate.
    • This is the biggest and most likely vehicle for other items to be attached.
  • Expiration of authorities for the Federal Aviation Administration (FAA) to operate on March 31, 2018.
    • While a must-pass bill, this could easily be dealt with in the spending bill that needs to be enacted the week prior.
3. The Fate of Dreamers and Measures Related to the Affordable Care Act Are Now Much More Uncertain.
Congress and the President continue to debate how to find a permanent solution for those individuals affected by the rescission of the Deferred Action for Childhood Arrivals (DACA) program. Three factors are increasing the likelihood that no near-term resolution will be found.
  • First, the recent court order that temporarily reinstates DACA for individuals who received prior approvals for protection under the program reduces the pressure to act by March 5th (though the administration is appealing that ruling).
  • Second, the Democrats believe the Republican demands in exchange for Dreamer relief are unacceptable, whereas Republicans think Democrats have not moved far enough in their direction.
  • Third, in the absence of a “must-pass” vehicle, DACA would have to pass Congress as a stand-alone piece of legislation. That is especially difficult in the House of Representatives, where Republicans will be reluctant to put a bill on the floor that is not supported by a majority of Republicans.In December, there were encouraging signs that Congress would act in a bipartisan manner to stabilize and reform the health insurance markets under the Affordable Care Act, including by establishing a federally funded reinsurance program and reinstating cost sharing reduction payments. With completion of a budget deal and other healthcare related items, this is now less likely.“I’ve been working hard the past 12 months in DC to educate Congress and Senate of the importance of 179D and 45L in terms of job creation and the importance of using 179D to have our country be more energy efficient. I’m thankful through our efforts, we were able to get these important tax benefits extended through 2017,” said Tax Reform Expert and CEO of Engineered Tax Services, Julio Gonzalez.The Chamber also noted that “The Bipartisan Budget Act was in fact bipartisan passing with the support of a sizeable numbers of Democrats and Republicans; proving not all hope for governing is lost. See how your member of Congress voted: House Vote; Senate Vote.”You can find out more by reaching out to Mr. Gonzalez directly at JGonzalez@EngineeredTaxServ

Engineered Tax Services Continues to Give Back to Roosevelt Elementary School

The team at Engineered Tax Services (ETS) continues to give back to Roosevelt Elementary School by volunteering at the Roosevelt Rockets Reading Buddies program. This all began five years ago after the tragedy at Sandy Hook Elementary School in Connecticut. CEO of ETS, Julio Gonzalez, decided he wanted to do something positive each month to help the children at Roosevelt Elementary School in West Palm Beach. That’s when ETS started monthly programs where ETS employees and friends donated their lunch hours to do positive activities with Roosevelt students.

“I wanted to fund a project, and with the tragedy at the time, I thought it would be appropriate to adopt a school. Now with one of the deadliest school shootings in modern American history that happened this week at Marjory Stoneman Douglas High School in Parkland, it’s more important than ever to continue to bring positivity to schools. We as a company think this is a nice way to encourage students and to get their creative juices flowing,” said Mr. Gonzalez.

The first project was a two-year mural sponsorship. The second is the Roosevelt Reading Buddies program – which continues to this day.

“The program has really become a part of doing something positive for both the kids and the community. That’s why we have continued these efforts for five years,” said Mr. Gonzalez.

Not only do Engineered Tax Services employees donate supplies, but they also donate their time and lunch hours to read with these kids.

“The goal is to brighten and raise the children’s and staff’s spirits and make them excited to enter school each day – ready to learn and ready to grow,” said Mr. Gonzalez.