3 Tax Deductions that Real Estate Investors Often Overlook

As a commercial property investor/owner, there are several IRS-sanctioned tax benefits within your reach designed to uncover hidden value and profitability within your investments. We specialize in assisting property investment firms and their CPAs in identify areas of tax savings opportunities.

1. Cost Segregation

A cost segregation study is a federal income tax analysis 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 it is newly purchased, renovated or recently constructed property, the components of your building may be properly reclassified through a cost segregation study by using shorter recovery periods for depreciation.

The study carves out certain qualifying portions of your building into 5, 7 and 15-year life spans that are normally buried in 39 or 27.5 year categories. Most importantly, Engineered Tax Services offers Premium Cost Segregation Analysis in which we incorporate principles of construction tax planning (i.e., proactively addressing and recommending materials and supplies in the pre-design phase to ensure personal property classification as opposed to real property classification) and abandonments per the final repairs and maintenance treasury regulations.

2. 263(a) – Repairs vs Capitalization

The Final IRS Regs relating to tangible property were issues in September of 2013 and provide for additional write-offs for most taxpayers. ETS can assist in creating required capitalization policies and identifying expenses for repairs and maintenance, which can reduce your tax liability and improve cash flow. First, we will identify which asset costs are not properly classified, then reclassify them as deductible repairs defined by I.R.C §162 and §263(a). Deductible repairs may include “incidental repairs” that help to maintain efficient operating condition but do not necessarily prolong its life and material value or adapt the property to a new or different use. Expenses incurred or paid for incidental repairs and maintenance are not considered as capital expenditures and may be reclassified to accelerate deductions in the current year.

3. 179D EPAct Tax Deduction

ETS specializes in the energy certification process required by the IRS. The certification calculates the tax deduction achieved from the installation of energy-efficient assets. The deduction ranges between $0.60/sq ft and $1.80/sq ft for energy efficient Lighting (i.e., reductions in lighting power density levels), HVAC systems and the building envelope. We have provided thousands of the highest quality energy tax certifications across the country since 2005. Handling over 150 certifications every month, we have perfected the process by working closely with the IRS on a regular basis. We offer a measurable dynamic to increase your return on investment & improve efficiencies – all with the goal of reducing operating expenses & obtaining tax deductions or credits that you deserve.

Other hidden treasures buried in your real estate investments include:

  • Reserve Studies
  • Disposition Studies
  • Historical Tax Credits
  • New Market Tax Credits
  • Engineered Insurance Appraisals

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