What is it? Cost segregation is a tax strategy approved by the IRS in 1997 which allows companies and individuals, who have purchased, constructed, expanded, or remodeled any type of commercial real estate, to reclassify specific real property assets. Usually receiving a depreciation life of 39 years * (commercial real property) or 27.5 years (commercial residential property) this method results in “tangible personal property” being treated as 5-year property or land improvements being treated as 15-year property for purposes of depreciation. Portions of the electrical, plumbing, mechanical systems, and site improvements of a building along with hundreds of other components can be allocated into shorter lives translating into immediate cash flow!
* Note two-thirds of Oklahoma, because of its unique Native American heritage, qualifies for special federal tax treatment under very specific parameters, i.e. quicker depreciation than the national norm. For those already utilizing this accelerated depreciation schedule, cost segregration will depreciate properties quicker than this treatment but also factors the aforementioned electrical, plumbing, mechanical systems, and site improvements of a building along with hundreds of other components into the equation! Kindly note that all figures estimated on this website assumes a 39-year depreciation schedule thus for those firms/individuals already using Oklahoma accelerated schedule the figures would be slightly less but cost recovery could still be very much realized.
Time Value of Money Using this mode of accounting effectively increases taxpayer’s depreciation expense in today’s dollars. By recovering up to 40% of the building cost over the first 5 years as opposed to depreciating it over 39 years, translates into significant tax savings and taps into the concept of the “time value of money”. In other words this substantially increases taxpayers present value of available dollars.
How much cash are we talking about? On average our segregation study offers approximately $150,000 in additional depreciation per $1 million dollars in purchase or construction costs over the normal 39-year straight line method.
History of Cost Segregation Over 300 rulings, letters, and IRS memoranda have provided documentation and significant case law for the support of Cost Segregation Studies: Hospital Corporation of America vs. The Commissioner is one of the landmark decisions which gave support to the way we review and analyze your property/properties to determine the tangible personal property within your building(s) which may qualify for depreciation lives of 5, 7, or 15 years rather than 39 years (nonresidential real property) or 27.5 years (residential real property). Even if you are presently depreciating certain property in an accelerated schedule there may still be cost recovery left on the table. Only if you have secured specialized experts (per the IRS) will all allowable property be depreciated on an accelerated basis.
|Property Type||Reclassification||Property Type||Reclassification|
|CC & Courses||28~60%||Research Facilities||22~45%|
|Retail Facilities||18~35%||Assisted Living/Retirement||22~45%|
|Grocery Stores||20~45%||Mixed Use Properties||18~30|
* The actual savings vary according to the design of the facility, specific use, date of service and the actual costs associated with the property.
Feasibility report We will provide a no-cost, upfront feasibility report to determine the cash flow and net present value (NPV) benefits.
Initial consultation to make sure a study will be beneficial Certainly, the initial benefits of a Cost Segregation Study may be impacted by corporate structures, individual tax situations, subsequent disposition of a property, a 1031 exchange, recapture implications, passive activity limitations, REITS and other subsequent events that a real estate investor may encounter post Cost Segregation Study.
Who You Hire Makes All The Difference
• Frequently Cost Segregation competitors “estimate” or just “assume” a percentage of the basis to reclassify. This as a practice is all too often employed by providers – unfortunately at the expense of the taxpayer/owner. This approach not only leaves many thousands (often hundreds of thousands of dollars) unavailable to the owner/taxpayer – but more importantly this practice puts the client at risk. This approach often has a modest fee attached – the provider assuming that the owner/taxpayer is unsophisticated and will compromise on benefits as well as assume the risk with the IRS in case of an audit. All of our work will withstand IRS scrutiny and is backed by Core Solutions Group’s Unlimited Audit Defense and Client Satisfaction Guarantee.
• We understand that Cost Segregation Reports are a serious tax matter that involves IRS scrutiny. We will not take the approach of short-term gain to risk long-term reputation and have gone to great lengths to use the latest tools, methods and procedures to deliver the most detailed and comprehensive reports in the industry, according to strict IRS rulings and requirements.
• We are one of the few firms in the country to perform the RSMeans Tolerance Test. This is a comparison of the constructed cost of the building compared to the national average in terms of square foot, cost and percentage of assets within the total cost of electrical, mechanical and personal property elements. If we find significant differences such as 15% electrical versus the national average of 10% for like kind building we will then document the difference to the IRS. Most firms simply guess. Although this takes us a considerable amount of time, we can be much more accurate which leads to greater audit defense and a lot of the time, a larger cash benefit to the client.
• Provide a no-cost property review or feasibility report to determine the cash flow benefits.
• Evaluation of current tax status and future business plans with CPA to determine if a study will be a benefit.
• Review of the project’s/facility’s construction cost by component or systems.
• On site visit of the facility/project to document the systems and components to determine how they’re utilized. Site photos are always taken.
• A detailed engineering review of assets including special purpose mechanical, electrical and plumbing, decorative finishes, site improvements and special purpose construction. As well as blueprints, AIA documents, and change orders.
• Classification of each building component into the appropriate tax life as prescribed by the IRS guidelines and relative case law.
• Finally, we deliver a 110-page written report with an executive summary, asset detail supporting the reclassified cost, specific case law and revenue rulings, depreciation schedules and all of the necessary tax forms.
Pricing We charge a very competitive fixed fee based on size and scope of each project.
tags: Tulsa Cost Segregation, Tulsa Cost Segregation Study, Oklahoma City Cost Segregation Study, Oklahoma City Cost Segregation, Norman Cost Segregation Study, Norman Cost Segregation, Broken Arrow Cost Segregation, Broken Arrow Cost Segregation Study, Lawton Cost Segregation, Lawton Cost Segregation Study, Edmond Cost Segregation, Edmond Cost Segregation Study, Moore Cost Segregation, Moore Cost Segregation Study, Midwest City Cost Segregation, Midwest City Cost Segregation Study, Enid Cost Segregation, Enid Cost Segregation Study, Stillwater Cost Segregation, Stillwater Cost Segregation Study, Muskogee Cost Segregation, Muskogee Cost Segregation Study, Bartlesville Cost Segregation, Bartlesville Cost Segregation Study, Dewey Cost Segregation, Dewey Cost Segregation Study, Shawnee Cost Segregation, Shawnee Cost Segregation Study, Owasso Cost Segregation, Owasso Cost Segregation Study, Cost Segregation Study Incentives for Owasso Cost Segregation, Ponca City Cost Segregation, Ponca City Cost Segregation Study, Ponca City Cost Segregation, Ardmore Cost Segregation, Ardmore Cost Segregation Study, Duncan Cost Segregation, Duncan Cost Segregation Study, Yukon Cost Segregation, Yukon Cost Segregation Study, Del City Cost Segregation, Del City Cost Segregation Study, Bixby Cost Segregation, Bixby Cost Segregation Study, Sapulpa Cost Segregation, Sapulpa Cost Segregation Study, Altus Cost Segregation, Altus Cost Segregation Study, Sand Springs Cost Segregation, Sand Springs Cost Segregation Study, Claremore Cost Segregation, Claremore Cost Segregation Study, McAlester Cost Segregation, McAlester Cost Segregation Study, Mustang Cost Segregation, Mustang Cost Segregation Study, Jenks Cost Segregation, Jenks Cost Segregation Study, Ada Cost Segregation, Ada Cost Segregation Study, El Reno Cost Segregation, El Reno Cost Segregation Study, Chickasha Cost Segregation, Chickasha Cost Segregation Study, Durant Cost Segregation, Durant Cost Segregation Study, Tahlequah Cost Segregation, Tahlequah Cost Segregation Study, Miami Cost Segregation, Miami Cost Segregation Study, Okmulgee Cost Segregation, Okmulgee Cost Segregation Study, Woodward Cost Segregation, Woodward Cost Segregation Study, Elk City Cost Segregation, Elk City Cost Segregation Study, Guymon Cost Segregation, Guymon Cost Segregation Study, Choctaw Cost Segregation, Choctaw Cost Segregation Study, Weatherford Cost Segregation, Weatherford Cost Segregation Study, Glenpool Cost Segregation, Glenpool Cost Segregation Study, tax strategy, IRS, 1997, companies, individuals, purchased, constructed, expanded, remodeled, commercial real estate, reclassify, real property, assets, depreciation life, 39 years, commercial real property, 27.5 years, commercial residential, tangible personal property, 5-year property, land improvements, 15-year property, depreciation, electrical, plumbing, mechanical systems, site improvements, building, components, cash flow, Oklahoma, Native America, federal tax treatment, 1994~2011, rental, depreciate, 39-year depreciation schedule, accelerated schedule, lucrative tax strategy, major purchase, commercial, U.S. Treasury Department, accounting, taxpayer, depreciation expense, present value, available dollars, additional depreciation, purchase, construction, cost, Hospital Corporation of America vs. The Commissioner, landmark decisions, review, analyze, property, properties, tangible personal property, building, non-residential real property, 27.5 years, residential real property, $500,000, leaseholder, $250K, improvements, federal taxes, demolition, major renovation, project, reclassification, property type, restaurants, apartment buildings, hotels, fitness centers, shopping malls, banks, medical, dental, manufacturing, warehouses, TV, radio, cell, mobile, phone, firms, airplane, hangers, leaseholds, country club, golf course, research, facility, retail, facilities, assisted living, retirement, community, theme park, resort, office building, wineries, grocery store, mixed use, savings, design, specific use, date of service, actual costs, feasibility, report, cash flow, net present value, NPV, benefit, consultation, study, beneficial, corporate structure, individual, tax situation, disposition, 1031, exchange, recapture, implication, passive activity, limitation, REIT, investor, reclassify, providers, taxpayer, owner, IRS audit, scrutiny, RSMeans, tolerance, test, constructed cost, national average, square foot, percentage of assets, electrical, mechanical, personal property, elements, cash benefit, property review, construction cost , component, system, site visit, engineering review, echanical, electrical, plumbing, decorative, finishes, site improvements, special purpose, construction, blueprints, AIA, documents, change orders, classification, building component, appropriate tax life, IRS guidelines, relative case law, written report, executive summary, asset detail, reclassified cost, specific case law, revenue rulings, depreciation schedules, tax forms