Faster depreciation can lead to significant tax savings, because traditional accounting will not capture the full range of assets that qualify for short lives under the tax law.
What is a cost segregation study?
A cost segregation study identifies building assets that can be depreciated at an accelerated rate using a shorter depreciation life, most of which are not readily identifiable on cost documents. These assets may be part of newly constructed buildings or existing buildings that have been purchased or renovated.
If the expense of the construction, purchase, or renovation was in a previous year, favorable IRS rulings allow taxpayers to complete a cost segregation study on a past acquisition or improvement, and take the current year’s deduction for the resulting accelerated depreciation not claimed in prior years.
What’s on your mind?
In managing fixed assets, your challenges are to:
- Reduce your income tax by maximizing your deductions
- Improve cash flow
- Stay up to date with changing tax laws
- Provide comprehensive accounting records and IRS documentation
Create opportunities with CLA
CLA performs each study with a combined tax and engineering perspective. Our services include:
- A comprehensive review of your construction invoices and building plans by our tax and engineering staff to maximize the allocation of five, seven, and fifteen year assets.
- An on-site inspection of the building to accumulate additional facts for the study — including photos of the building’s exterior and interior.
- Appropriate allocation of all indirect (i.e., soft) construction costs, which are easily overlooked.
- Final reports that provide easy-to-use data for your tax planning.
- Audit defense provided as part of engagement in the event of examination
- Additional opportunities exist for properties acquired through or being considered for a Section 1031 like-kind exchange
How we can help
Our cost segregation studies have reduced our clients’ taxes on a range of buildings, including:
- Agriculture and biofuel production facilities
- Apartment complexes
- Auto dealerships
- Data centers
- Financial institutions, including banks and credit unions
- High-tech facilities
- Manufacturing plants and distribution warehouses
- Medical facilities
- Research and development facilities
- Retail stores and shopping centers