Cost Segregation Studies
A Cost Segregation Study, or Cost Recovery, is a strategic tax saving tool that allows you to increase your cash flow by accelerating depreciation deductions and deferring your federal and state income taxes. The goal of a Cost Segregation Study is to identify, segregate, and reclassify your building-related costs that are currently classified as real property to shorter depreciable tax lives.
Recent IRS rulings and procedures have allowed taxpayers to change accounting methods to take advantage of these previously understated depreciation expenses back to the year 1986. This is done without amending your taxreturns, which generates a relatively large tax deduction in the year of change.
Who can benefit?
Individuals or companies can accelerate depreciation deductions for:
• Construction of a new building
• Renovation or expansion of your current facility
• Purchase of a building
• Renovations made to a building you are leasing
What are the benefits?
• Reduced income taxes
• Increased cash flow
• Increased competitive edge - Additional cash flow available for new investments
What types of buildings qualify?
Just about any building or renovation project will present inherent opportunities. Our professionals have performed cost segregation studies on numerous types of real estate, including:
• Office Buildings
• Apartment Buildings
• Hotels/Motels
• Restaurants
• Manufacturing Facilities
• Warehouse Facilities
• Auto Dealerships
• Retail Establishments
• Farms
• Golf Courses
Our Unique Cost Segregation Packages
At Reinsel Kuntz Lesher LLP, tax consulting is our core business. By engaging our firm, you will work with tax professionals who understand the significance of a Cost Segregation Study and who are familiar with the construction industry.
We will tour your facility, review all direct and indirect costs, and confer directly with your contractor to ensure that we have the cost detail and the necessary supporting documentation.
We offer two levels of cost segregation service - a Cost Segregation Analysis or a Formal Report. A Cost Segregation Analysis will include an analysis of the construction costs and determination of appropriate depreciable lives of each item on a final listing. Our work papers will provide sufficient detail for you to incorporate the segregated costs into your depreciation software.
A Formal Report will include the analysis described above in addition to a report detailing specific IRS rulings, procedures, and recent court case decisions supporting the segregation of assets. The report will also include asset summaries, tax authority support, and site photographs.
In addition to both the analysis and formal report, we will analyze the differences in depreciation that occur with and without the study. A calculation of the net present value of the current and future tax benefits will be provided as another mechanism to judge the benefits of the project. These same analyses can be provided as an estimate before the project commences, providing you with the tools necessary to make an informed business decision to proceed with this value-added service. We can quote you the anticipated benefits as well as the cost of the project - up front, at no cost.
