What is Cost Segregation?

The US tax code, while standardizing the depreciation of real estate over a 39 year period, provides the opportunity to carefully itemize certain aspects of the real estate that may be more appropriately defined as personal property. Non-structural items, including specialty lighting, interior decorating, exterior landscaping and even the labor costs associated with the installation of these items can be reclassified for accelerated depreciation. By segregating these building costs, property owners can realize a faster return on their capital investments. Highly customized building applications, including research centers, manufacturers, restaurants and hotel uses may find substantial percentages of their projects advance from 39 year to 5 or 7 year depreciation schedules. The result? Immediate tax benefits.

Who is Eligible?

Any building in the United States currently under construction or remodeled since 1987 may be eligible. For cost/benefit purposes, an analysis makes sense for buildings valued at least $1 million. Since depreciation is an offset on your taxable income, the entity must be reporting a profit to benefit.

How Does it Work?

The Hunter Group process is relatively simple:

• We complete a preliminary review to quantify the benefits of a study. Some basic information about the property will be needed. Building and component engineering drawings should also be made available. This analysis will determine if an in-depth review will yield a significant enough result to warrant the expense of the analysis.
• We discuss the review, present our findings and our fee estimate.
• When the decision to move forward is granted, a detailed report of estimated and actual costs is compiled.
• A site visit and review is made by your Hunter Group expert.
• Working with our collaborative architectural engineering professionals, we assemble the data, allocate costs to assign proper classification of your assets.
• A carefully prepared comprehensive report is delivered to you as part of our review meeting.
• Should the IRS request a review of our report, Hunter Group will provide initial review support at no additional cost.*

 

 

Interested in taking the next step?  To determine if cost segregation will provide tax benefits to your company, download our cost segregation data analysis excel sheet and e-mail your completed file to Scott Davis today for a no-obligation discussion and review.  Click here to get the form.