Cost Segregation Analysis - When You Care Enough to Give the Very Best

Written by Corporate Tax Incentives. Updated Aug 21, 2019.

CS_CPAYou’re a CPA. You direct large sums of money, prepare tax returns, bestow financial advice, conduct audits…What would you consider your paramount duty for the success of your business?

Keep abreast of new tax regulations? Stay dialed in to current economic trends? Continue industry skills training?

Perhaps. But what ultimate purpose do all these activities support? Serving the Client. Your clients are your firm. Providing them optimal service should be your principal focus. And that involves discovering and delivering every opportunity to maximize your clients’ tax savings.

Cost segregation is one of those opportunities not to be overlooked – particularly since the Tax Cuts and Jobs Act (TCJA) of 2017 has powered cost segregation’s bonus depreciation with more cash-saving potential than ever before.

In and of itself, cost segregation offers renters and property owners generous possibilities for hastened cash flow. A comprehensive analysis can cut a portion of a commercial property’s 39-year depreciable life down to 5, 7, or 15 years.

Hey CPAs, Do Cost Segregation Studies Benefit Your Clients? You Bet.

The Good Things in Life Are Better with a Bonus

But then add bonus depreciation. Before the TCJA, this additional benefit permitted taxpayers to deduct 50% of an eligible short-life asset’s purchase price for the year it was acquired. New construction and renovations qualify, along with items such as office furniture, computers, company vehicles, and machinery - and millions more.

Items excluded are those that contribute to “the enlargement of the building, any escalator or elevator, or the internal structural framework of the building.”1 Real property and used assets did not qualify.

Now the TCJA has kicked in a colossal 100% bonus depreciation deduction - if the property was placed in service after September 28th, 2017 or before December 31st, 2022. And another huge boon: used property can now qualify.

The TCJA also increased Section 179 expensing to $1 million, with an increased cap of $2.5 million.  Combined with the 100% bonus depreciation, this helps offset the C-Corporation tax rate reduction to 21%.

When Gov’t Gives You Lemons, Make Cost Seg Lemonade

And a tiny oversight in the TCJA bill created more appeal for cost segregation studies. An error classified certain QIPs (Qualified Improvement Property) with a 39-year recovery period instead of the intended 15-year, rending the QIPs ineligible for bonus depreciation.

Until Congress corrects the mistake, a cost segregation study stands as the only path to increased cash flow for asset depreciation strategies.

Be True to Your Cost Segregation

Occasionally property owners and renters misconceptions stop them from pursuing a cost segregation analysis – like thinking their building structure is too small to benefit, that a study’s cost overrides the potential return, or that an analysis is too risky with the possibility of an audit.

A CPA can wipe these falsehoods away by sharing the facts: Properties with a base amount $1 million and new building additions starting at $500,000 qualify; a careful and comprehensive study could yield substantial cash flow that can impressively offset the cost of the study; and again, a meticulous analysis should ease any worries if an audit rears its head.

A Little Study Can Mean so Much

Look at what you can put back in your clients’ pockets:

  • A warehouse’s new construction cost: $19,332,414
    • Additional depreciation: $2,097,840 → Resulting cash flow: $830,745
  • An apartment’s new construction cost: $7,243,200
    • Additional depreciation: $1,512,158 → Resulting cash flow: $598,814
  • A vineyard’s new construction cost: $19,332,414
    • Additional depreciation: $2,097,840 → Resulting cash flow: $830,745

Giving Them Your Best

The Tax Cuts and Jobs Act of 2017 has imparted cost segregation with more power to liquidize your clients’ cash. Now more than ever, they stand to benefit from the tax-saving strategy.

They can use their recovered revenue to pay down loans, invest in new business equipment, or acquire additional properties. Whatever they choose, you did your all to maximize their money.

And to be sure all assets are appropriately evaluated and classified, and all viable deductions are captured, partner with a cost segregation specialist.

Show your customers you care by giving the very best service; conduct a cost segregation study.



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1. New rules and limitations for depreciation and expensing under the Tax Cuts and Jobs Act, IRS, 2018

Topics: Cost Segregation, CPA

Corporate Tax Incentives

Written by Corporate Tax Incentives

CTI is a tax incentives specialty firm that secures greater tax credits for businesses with our proven project methodology and unparalleled personalized service. For almost 20 years, our elite tax professionals have proactively engaged clients to deliver unmatched value with transparency and efficiency thorough secure in-house software, comprehensive audit-ready deliverables, and 24x7 access to real-time dashboards. We are tax consultancy experts passionate about maximizing credits and incentives for powering the success of your business.