Can a cost segregation study apply to buildings or leasehold improvements not yet constructed?
Yes! A cost segregation study can literally begin at the concept phase long before plans are drawn. The study could be completed, 1) once the Certificate of Occupancy is issued and, 2) the final tax-basis is ascertained from the final AIA 702s and 703s in collaboration with your CPA. By being engaged at the concept phase a cost segregation provider can make recommendations to you and your architect/engineer/builder that will actually “create” short-life assets from what would have been 39-year assets were cost segregation applied post-construction rather than pre-construction. Doing so will normally reduce your real estate taxes, use taxes, as well as insurance costs. Additionally, applying cost segregation at this initial phase allows for sound planning with your lender. Due to the additional cash freed up by cost segregation, it is probable you can receive a reduced interest rate on your mortgage as well. Debt/service ratios are important and better ratios translate to lower mortgage costs.
All parties should consult their tax professional for further information.
Cost segregation delivers results every time it’s applied!
Contributed by Jeffrey M. Hobbs