“My building’s too small and cost segregation only works for large properties.”
“Cost segregation must be done the first year of ownership, and I missed the boat.”
“I can’t change my accounting method and I have no idea how to amend tax returns.”
There are a number of misconceptions surrounding cost segregation, which ultimately leads building owners to miss too many deduction opportunities.
If you’re currently looking to perform a cost segregation analysis of your real estate assets, you need to follow these three tips to ensure the study will not only increase your tax savings, but maximize them:
1. Be Aware Of Every Deduction Opportunity
Many business owners are aware that their real estate assets qualify for some type of tax deduction where cost segregation is concerned. However, most business owners do not understand how to identify every deduction opportunity.
Do you know how to reallocate real property to personal property? Knowing how to identify each opportunity maximizes your assets’ depreciable tax life and accelerated depreciation methods.
When your cost segregation analysis is engineer-based, you have an expert who is able to assess a wide-range of building components, from electrical installations and plumbing to mechanical components. Each asset that can be classified adds up to substantial deductions. Without an engineer who’s knowledgeable in cost segregation services, it’s likely that missed opportunities will occur.
2. Strive For A Well-Rounded Cost Segregation Team
In general, cost segregation studies require the work of a construction engineer, with both knowledge of the construction process and the tax law involved in property classifications for depreciation.
Additionally, someone with a CPA background is an integral part of the process, as they have expertise in cost estimating and allocation, as well as the tax laws. When your cost segregation strategy is built by a team combining engineering, construction and CPA skills,
3. Take A Broad Approach To Maximize Your Benefits
A well-rounded team looks beyond cost segregation for tax savings opportunities. However, a person skilled in only cost segregation analysis is going to look for specific cost segregation opportunities and cannot offer tax guidance beyond that.
The truth is, if a cost segregation analysis is reviewed by people with a varied skill set, the study reveals more opportunities for capturing tax credits and incentives. Identifying green building incentives, such as 179D deduction or solar power credits, should also be part of your overall cost segregation strategy.
By honing in on a robust, comprehensive strategy, you created an overall tax planning solution that truly saves your business a substantial amount of money.
Download our guide to learn about proven cost segregation strategies to help you benefit from valuable tax deduction opportunities.
