A Cost Segregation Study Can Help You
Keep More of Your Money
A Cost Segregation Study can save you money in multiple ways. It will definitely reduces your federal income tax burden by using accelerated depreciation on all qualifying assets. This is guaranteed, but let's look at the other possible benefits:
A Cost Segregation Study will identify depreciation you failed to take in the past, resulting in a tax credit to be carried forward into the current tax year. This is done via IRC Sec. 481(a) “catch-up” provision.
- Reclassifying assets in a commercial property as tangible personal property results in a lower “real” property value. This, in turn, will reduce your real estate taxes, often as much as 25%. Assets reclassified as tangible personal property will then fall under the personal property tax rate which is a lower tax rate than the real estate tax rate.
- The cost of property insurance may be reduced. Assets that have been reclassified as tangible personal property are insured at a lower cost "per thousand" than real property, typically between 10 and 20%.
- If your cash flow is increased significantly by all of your Cost Segregation savings, you may be able to negotiate better terms with your lender. Many lenders will negotiate on their loan criteria by reducing the interest rate up to 1% or will reduce the required down payment amount when debt-service coverage ratios are increased significantly as when Cost Segregation is applied.