Accelerate Tax Deductions with Cost Segregation

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Accelerate Your Deductions

When businesses buy and maintain real property, these costs are typically capitalized and depreciated over an extended period of up to 39 years. However, taxpayers and tax preparers often overlook opportunities to significantly accelerate these deductions through a cost segregation analysis.

A cost segregation analysis identifies specific components of a property that can be depreciated over shorter periods, allowing businesses to deduct more in the early years. This reclassification can include elements such as electrical systems, plumbing, and landscaping, which may be depreciated over 5, 7, or 15 years instead of 39. By accelerating these deductions, businesses can improve their cash flow and reinvest savings back into their operations.

For new construction, a cost segregation analysis is an essential step to maximize near-term deductions and track building systems that may be replaced or repaired in the future. Existing structures should also be evaluated for potential repairs or disposition deductions. Additionally, many taxpayers overpay their local business property taxes, which can be reviewed and potentially reduced as part of our comprehensive analysis.

FAQs

How much should I expect to save from a cost segregation analysis?

The results vary depending on the details of the building, but typically, 20-30% of the building cost can be accelerated into shorter recovery periods. This can significantly offset income on current and future tax returns.

How does the process work?

We start by evaluating federal depreciation data to determine if accelerated deductions may be available. We then request additional information from you to confirm the opportunity.

If you decide to proceed, we conduct a detailed analysis and deliver the cost breakouts and supporting information. For assets placed into service in prior years, we also compute the 481(a) catch-up adjustment and complete the necessary Form(s) 3115 to change your method of accounting.

For personalized advice and to learn more about how a cost segregation analysis can benefit your business, contact our team at info@strategictaxplanning.net or call us at (202) 455-6010. We are here to help you maximize your tax savings and optimize your financial strategy.

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