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Real Estate Cost Segregation

We have discovered a new and legal way for you to receive secure, meaningful federal, state, and local tax savings  - the acceleration of income tax depreciation deductions.  

Valuable Tax Savings Imbedded in Buildings

The IRS permits the acceleration of depreciation of some assets that traditionally would be imbedded into the cost of buildings.  In essence, they are allowing us to carve out shorter-lived assets (qualifying for 5,7, and 15 year write-off periods) that are normally imbedded in a building’s construction or acquisition costs (generally depreciated over 39 years).  To meet IRS acceptance rules, an engineering-based cost segregation study must be conducted and used to justify the accelerated depreciation.

A cost segregation study involves identifying and properly reclassifying the capital amounts allocated to tangible personal property, other tangible property (i.e., IRC Section 1245 property), and land improvements from building costs.

We will work with you in “mining out” these buried savings from:

  • New buildings presently under construction.
  • Existing buildings undergoing renovation, remodeling, restoration, or expansion.
  • Prior purchases of existing property.
  • Office/facility leasehold improvements and “fit outs”.
  • Post-1986 real estate construction, building acquisitions, or improvements where no cost segregation study was performed (even though the statute of limitations previously closed on the property construction/acquisition year).

Profit from the benefit of cash flow savings!  For every million dollars of property you reclassify for faster depreciation write-offs, the present value of your increased cash flow from income tax savings approximates $230,000.

Example: Light Manufacturer acquired a facility four years ago for $6 million.  Based on the cost segregation analysis, Dugan & Lopatka engineers determined that 30% of the building qualifies for short-life classification.  By performing the cost segregation study, and filing required accounting method change documents, Dugan & Lopatka creates present value cash flow savings from tax reduction approximating $310,000!

If you would like to know more about how we can help you, please complete the Contact Us form or call us at (630) 665-4440.

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By Dugan Lopatka - Accountants for Midsize Businesses in Chicago:  CPAs for Small Businesses

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Dugan & Lopatka, CPAs, PC, 104 E. Roosevelt Road, Wheaton, Illinois 60187 -MAP- T: (630) 665-4440 Fax: (630) 665-5030