Real Estate Cost Segregation in Philadelphia, Pennsylvania
Cost segregation is a strategic tax planning method that aims to increase cash flow by accelerating depreciation deductions for companies and individuals based in Philadelphia, particularly in the early years of real estate ownership. It involves conducting a study that identifies and reclassifies personal property assets within a building, allowing for a shorter depreciation time for taxation purposes. This practice effectively reduces the current income tax obligations of the property owner.
The benefit of a cost segregation study is that it segregates the cost components of a building or facility in Philadelphia into the proper asset classifications and recovery periods for federal and state income tax purposes. By frontloading depreciation deductions, it can result in significantly shorter depreciation times and thus, a deferral in tax payments.
This strategy is particularly valuable for taxpayers who have constructed, purchased or renovated real estate, as it can identify substantial tax-saving opportunities by combining engineering, construction expertise and tax accounting rules to find the most advantageous depreciation schedule.
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ETS offers comprehensive real estate cost segregation in Philadelphia. Connect with our team for a free feasibility study.
Frequently Asked Questions
How to Get Started With Cost Segregation Analysis in Philadelphia
Engineered Tax Services will be happy to either visit your premises in Philadelphia or do a remote visit so that we can give you a free cost segregation feasibility study. We will:
- Evaluate your current tax status and future business plans to determine if a cost seg study should be applied to your project
- Evaluate the building’s construction costs by component or systems
- Review your project’s/facility’s construction documents, including as-built drawings and project specifications
- Visit the facility/project or provide virtual Tele-Engineering™ services 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)
Can You Do Your Own Cost Segregation Study?
No. Only an experienced team of licensed engineers and accountants 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). Working with tax experts in Philadelphia is the only way you can increase your near-term cash flow by deferring taxes.
Are Cost Segregation Studies Worth It?
Definitely! The 2017 Tax Cuts and Jobs Act allows for an immediate deduction for the full costs in the first year. If you own a property in Philadelphia with a class life of 27 years, you might be eligible for a sizeable bonus depreciation in year one by reallocating some of your building’s assets to a five- or 15-year lifespan.
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