Cost segregation: is it right for your business?COMMERCIAL PROPERTY owners who do not utilize cost segregation may be overpaying taxes every year. All federal taxpayers are eligible for accelerated depreciation Accelerated Depreciation Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years of the life of an asset. Notes: The straight-line depreciation method spreads the cost evenly over the life of an asset. expense deductions on certain components of a building. Without cost segregation, taxpayers are not able to take full advantage of the tax law. With a cost segregation analysis segregation analysis n. The determination of the number of progeny that have inherited distinct and mutually exclusive phenotypes. , on the other hand, taxpayers can benefit from larger depreciation deductions, which can increase cash flow and also lower capital costs. The use of cost segregation studies as a tax strategy is becoming increasingly popular and the amount of tax savings that a business or commercial property owner can realize could be very substantial. And while it is complex, with many rules governing cost segregation studies and the associated depreciation, your tax professional can help you determine if these tax laws can benefit your business. A cost segregation study is used to determine and reclassify Verb 1. reclassify - classify anew, change the previous classification; "The zoologists had to reclassify the mollusks after they found new species" class, classify, sort out, assort, sort, separate - arrange or order by classes or categories; "How would you the components of a commercial building that may be depreciated Depreciated may refer to:
Building and acquisition costs are depreciated over 39 years; however, shorter-lived assets may qualify for a shorter depreciation period of 5, 7 or 15 years. The structural portions of a building do not qualify for accelerated depreciation, but those that support the building can qualify. Examples of shorter-lived building components can include: * Portions of electrical, mechanical, and plumbing systems * Carpets and floor coverings * Wall coverings and partitions * Signage and lighting * Cabinetry and fixtures * Paving and sidewalks * Landscaping There is significant potential for reducing tax liabilities, and thus improving cash flow, as a result of a cost segregation study for certain properties. The IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. regulations allow for cost segregation to be applied to the construction, renovation or purchase of a commercial building (since 1986). Owners of several types of commercial property may benefit from cost segregation; those properties include: * Apartment buildings * Auto dealerships * Corporate office buildings * Golf courses and country clubs * Grocery stores * Hospitals and healthcare facilities * Hotels and motels * Industrial complexes * Manufacturing plants * Nursing homes * Restaurants * Strip malls and retail stores * Warehouses and distribution centers A cost segregation analysis requires a very thorough knowledge of the IRS laws and regulations, current legislation, and revenue rulings. It is a complicated matter and should only be undertaken by a qualified professional. A certified public accountant Certified Public Accountant (CPA) An accountant who has met certain standards, including experience, age, and licensing, and passed exams in a particular state. can provide guidance regarding a cost segregation analysis, and the associated tax implications, for your business. G. Keith Carter Keith Carter (June 3, 1948, Madison, Wisconsin) is an influential American photographer, educator, and artist noted for his dreamlike photos of people, animals and objects. , CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. is a partner in the Vincennes office of Kemper CPA Group LLP LLP - Lower Layer Protocol . |
|
||||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion