Chances are slim that you have heard of the process of cost segregation, right? The American Society of Cost Segregation Professionals defines cost segregation as the “process of identifying property components that are considered personal property or land improvements under the federal tax code.” Simply put, cost segregation will identify assets that can qualify for accelerated depreciation and in turn lower your income tax burden and by doing so will increase your cash flow. There are many myths floating around about cost segregation and we would like to help debunk these myths so that you can have the facts. This will allow you to start keeping more of your hard earned money…who’s not up for that?
Myth One: I already have an accountant and they probably did one for me.
This could not be further from the truth. Unless your accountant acted prior to May 13, 1996, the chances are great that your assets are not properly depreciated. The tax laws changed on that date, so it is important to take note of that. Even if you did have a cost segregation study done prior to that point, chances are good you have made major improvements to your building. Those improvements qualify to have cost segregation applied. Also, keep in mind that accountants are not trained in construction techniques or knowledge and therefore are not able to properly perform the study according to IRS Guidelines.
Myth Two: A cost segregation study will not really save me any money.
Do you own a profitable business? Is your business located in a freestanding building or in a leasehold improvement? If you can answer yes to these questions, then a cost segregation study will in fact save you money. The only way that a cost segregation study will not save you money is if the owning entity or pass thru entity is losing money and has no ability to either carry back or carry forward the credits generated. Otherwise, the accelerated depreciation from cost segregation generally range from 28% to 35% of the total asset basis. In most cases, a cost segregation study done by Segregation Holding will often yield results much higher than our original benchmark estimate.
Myth Three: If we do have a cost segregation study completed, our chances of an audit will also increase.
Again, this is not true. The IRS has rules and regulations that must be followed when it comes to cost segregation. When they are adhered to as strictly as Segregation Holding does you can rest easy knowing there are no red flags in the eyes of the IRS. What we are doing is filing an automatic change in accounting method which has been pre-approved by the IRS. In the rare event, that you do get audited and you had your cost segregation study performed by Segregation Holding, we will defend our cost segregation report against the IRS.
Myth Four: I do not have any assets that would qualify for accelerated depreciation.
This is often one of the biggest misconceptions of a cost segregation study. Generally speaking, every building will have at least 5% to 8% of the interior that would be eligible to be re-classified to a 5-year depreciation schedule. The exterior would also, generally speaking, have 5% to 8% of land improvements that would also be able to re-classified to a 15-year depreciation schedule. We offer a free quote, so you really have nothing to lose and so much to gain. Please keep in mind that you do have assets that would allow you to reap the benefits of having a cost segregation study done.
Our team of experienced engineers, architects and CPAs are here and ready to help. The time to have your cost segregation study done is now! You will finally be able to start keeping more of your hard earned money.
Contact us at 972-865-9050 or 443-COST-SEG (267-8734).