Cost Segregation
What is Cost Segregation?
Items that would otherwise be classified as real property are reclassified as 5, 7 or 15 year property for depreciation purposes.
When should you do a Cost Segregation Study?
Generally when the construction begins is the ideal time. However, a Cost Segregation Study can be done at any point by engineers reviewing the plans.
What’s the impact of a Cost Segregation Study?
It will accelerate your depreciation, meaning more cash flowing into your business. Generally, for every $100,000 of 39-year property reclassified as 7 year property, the present value of your cash flow at 8% will be about $20,000. Over time the savings significantly offset the fees associated with the Cost Segregation Study.
Who should consider using Cost Segregation Studies?
Property owners, who have purchased, constructed, expanded or
renovated a facility within the past few years (or plan to do so).
When can a Cost Segregation Study benefit your company?
Some examples are:
- If the cost of the renovation or construction exceeds $1 million
- If you are using straight line deprecation (Over 39 years)
- If you want to increase your cash flow by accelerating your depreciation
Our cost segregation report will give you the written support needed to back up any reclassifications with the Internal Revenue Service. We conduct an in-depth analysis of IRS Code sections, Revenue Rulings, Treasury Regulations, Tax Court cases, and Revenue Procedures. This documentation also serves as an audit trail for each property unit cost.
Call Marc Derstein or Virginia Hamilton to determine if a Cost Segregation Study is right for you.
Detweiler, Hershey & Associates understands the power of improving your cash flow… we can make your property assets work harder for you.