Reduce taxes on income and increase cash flow

Only beats the heck out of me because every owner of commercial property is not taking advantage of cost segregation as it should be. This tax strategy is very profitable opportunity for owners of commercial properties to achieve many of their financial goals simply by accelerating the depreciation of their property.

Yes, this is the key to segregation. Cost segregation is an IRS approved tax application by which commercial property owners can accelerate depreciation and reduce the amount of income tax due. This generates a saving substantial cash flow that owners often use to reinvest in the business, the purchase of other property, shall apply to their principle payment or spend on themselves.

Segregation analysis of the engineering costs reclassification of the property such that 30% to 50% of the cost base of the asset can be amortized over 5 years, 7 and 15, instead of the traditional cost of the entire course of 39 years. This means that the owner usually account with $ 70,000 to $ 100,000 in tax reduction (to increase cash flow) per million dollars of the cost base in their properties. Not only will the property be classified according to the IRS, but a significant tax savings (cash flow) is available for other uses.

Five years and 7 years of categories could include such things as structural and decorative elements for dedicated computer equipment, electrical and carpet. The fifteen years could include elements of the site utilities, landscaping and paving.

More common today than a few years ago, cost segregation is increasingly used by business owners, CPAs, financial advisors and other financial and real estate professionals on behalf of their clients. Of course, the problem was, and still is, a lack of recognition and understanding of the benefits of cost segregation on the part of these financial professionals.

At this point you should ask, "What commercial property qualifies for this tax strategy"? Well, it's pretty easy. Any type of commercial real estate qualification that has been built, bought or renovated since 1987. This means that the office buildings, warehouses, self storage facilities, retail strip centers, shopping centers, medical facilities and any other commercial property.

The next question might be "something, at least, my cost basis to be doing a cost segregation study can"? Even a pretty easy question. As a general rule, the cost basis of property should be $ 500,000 or more. This does not mean that the property with a lower cost base would not make sense. In many cases, the basic properties at a cost of from $ 250,000 sense for many owners. These properties typically lower cost base to take ownership of a decision based on the benefits to be realized.

Ok, another frequently asked question is "I had my property for several years, not yet qualify"? The answer is yes. There is a provision of the code that allows owners to claim the benefits of cost segregation retroactively, as if they had started the process at the time of their construction, purchase or renovation of properties. Best of all, there is no obligation to amend all returns earlier.

Many owners also ask: "My CPA these studies?" The fact of the matter is that in virtually every case, the CPA does not have the technical expertise to perform cost segregation studies as defined by the IRS. Normally you will contact a qualified third engineering company shares on behalf of their client to explore the financial benefits for their client.

A final question for this article, "Why did not my CPA told me about this tax strategy?" The answer, in most cases, is that not know or do not have a relationship with a third-party engineering that can actually perform the engineering analysis.

There are only a couple of reasons that cost segregation does not apply. First, if the owner does not have a tax liability (for example, a commercial building owned by a non-profit organization). Secondly, "flipping" property creates substantial depreciation back issues as well as capital gains problems. Usually tell our clients who are going to have their property for at least five years. Since it is not always possible to control all circumstances, they also suggest that the owner have an exit strategy as a 1031 exchange.

In summary, I hope it is clear that, as the owner of a commercial property, you should be taking advantage of cost segregation. If you are not taking advantage of this tax strategy, you should most likely be because you give up significant cash infusion .......