In New Mexico cost segregation can apply to both taxpayers and non-taxpayers because there are two types of cost segregation studies available, Federal and State. New Mexico state cost segregation, or New Mexico gross receipts tax (NMGRT) cost segregation, has been in effect since 2005 and has been utilized by hundreds of tax-exempt institutions across the state since then. NMGRT cost segregation requires an in depth understanding of federal cost segregation practices and provides New Mexico gross receipts tax relief to eligible tax-exempt entities. Tax-exempt entities that most often qualify for NMGRT cost segregation include healthcare, government, education and others who have newly constructed, added-on, or renovated their facilities.

Through an engineering based cost segregation study, Engineered Tax Services identifies personal property as defined by the State of New Mexico Taxation & Revenue Department and segregates it from the total construction / addition / renovation costs. Then, gross receipts tax can be refunded after construction or withheld on a go-forward basis during the construction process. Engineered Tax Services works with the tax-exempt entity and the general contractor to maximize benefit for all parties involved.

New Mexico gross receipts tax cost segregation service is currently being specified as standard language on many new construction RFP’s and ETS has engineers in New Mexico ready to assist. Get ETS involved at the RFP stage of the project to ensure your institution receives the proper gross receipts tax treatment going forward. ETS can also take a look at past projects to see if they qualify (up to three years back).

What Does a New Mexico Cost Segregation Study Entail?

Taxpayers are constantly looking for tax deductions that will lower the amount they are liable to pay to the government. Though many companies resort to spending, donations, tax credits, and other methods of deducting from their tax liability, few companies think about the tax benefits that can be found with a cost segregation study.

A cost segregation study is a detailed look at all the depreciable assets that your company owns with a focus on assigning each asset to the appropriate depreciation category outlined by the IRS Audit Technique Guidelines. Many companies simply place all their assets into 27.5- or 39-year straight-line depreciation when, if separated out, a company can significantly decrease their tax liability and gain a useful tool for annual tax savings.

At Engineered Tax Services, our studies are designed to find assets that fall under 5-, 7-, and 15-year depreciation categories. By accurately categorizing these assets and using the IRS preferred method of depreciation, you can significantly increase your cash flow and reduce tax liability. This can equate to tens of thousands of dollars in annual savings.

What Assets Are Included in a Cost Segregation Study?

While your company’s building, or buildings, might depreciate in 27.5 or 39 years, there are plenty of assets your company has that will depreciate much more quickly. For instance, carpet in a corporate building typically lasts five years. When the carpet is lumped in with your company’s building as depreciating every 27.5 or 39 years, your company isn’t taking advantage of the tax deductions available.

When our engineers go through a detailed review of your property they will divide up every asset you have into its correct category, allowing your company to boost the amount of deductions your company receives annually. This review it done by licensed engineers who read detailed blueprints to identify each asset along with the functional purpose of each component. This allows for the differentiation between personal property and real property within each building system identified by the IRS.

These systems include:

  • The Building Structure (walls, windows, roof, concrete…etc)
  • HVAC System
  • Lighting/ Electrical
  • Plumbing Systems
  • Escalators
  • Elevators
  • Fire Protection and Alarm Systems
  • Security Systems
  • Gas Distribution
  • Additional systems may be designated by the IRS.

To find out more about cost segregation studies in New Mexico and see if your company qualifies, contact Engineered Tax Services now!

For a complimentary review please use our Cost Segregation information form (click here).

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