Cost Segregation Study in Houston, Texas
A cost segregation study is a federal income tax tool that increases your near-term cash flow by deferring taxes. With a cost segregation analysis in Houston, you could be able to write off up to 30-35% of your building’s original purchase price in the first year!
Because depreciation occurs when a purchased building ages, it loses value over time. Actually, your building is not only one piece of property, but comprised of subcomponents (such as lighting fixtures, heating and air conditioning systems and other components that deteriorate over time).
But unlike the whole of a building, which is seen as having either 27.5- or 39-year lifespan, subcomponents are granted a five- or 15-year lifespan, making the depreciation deduction larger, especially in the first several years. Consequently, whether your real estate property in Houston is residential or commercial, you can write off that cost either in a 27.5- or 39-year timeframe.
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Frequently Asked Questions
How Much Money Could Detailed Cost Segregation in Houston Save You?
Since many components can be written off after a cost segregation study, if your purchase price was $1 million (for instance), you can deduct $300-400,000 immediately. Consequently, if you only invested $100,000 of your own money and borrowed the other $900,000, you’ve only spent $100,000, but received a $300,000 deduction!
For example, let’s assume you’re classified as a real estate professional or you have material participation in a commercial real estate investment in Houston and earn a $100,000 salary. Because you can apply your $300,000 deduction to offset taxable income, you’re only paying taxes on $700,000!
What Is Included in Cost Segregation?
Cost segregation professionals in Houston will survey your building’s subcomponents, like lighting fixtures, heating and air conditioning systems and other components that deteriorate over time. It assigns five- or 15-year lifespans to these subcomponents. Then the study assesses how much in taxes you can write off because of your financial loss from these aging subcomponents.
What Are the Risks of Doing Your Cost Segregation Wrong?
You could end up paying more taxes than if your cost segregation study was performed incorrectly. That’s why it’s important to hire an experienced team of licensed engineers and accountants in Houston (like Engineered Tax Services) who are qualified to analyze a building’s depreciating subcomponents (such as lighting fixtures, heating and air conditioning systems and other components that deteriorate over time). We’re experts at cost segregation.
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