It’s a common misconception by property owners that they can only do cost segregation on a new building or new renovation, but that’s simply not the case.
Although of course it is beneficial to have a cost segregation study done when you purchase, construct or renovate a new building, the real power of cost segregation savings is often on buildings that are not new.
The IRS Cost Segregation Audit Techniques Guide Chapter 6.2 says that “A taxpayer may conduct a cost segregation study on used property and then re-compute its depreciation deductions for prior years.” This is great news, because it allows for a “catch up” program that can produce powerful results.
Unfortunately, many building owners and CPAs do not have extensive experience with Cost Segregation so savings get missed.
It’s simply not their area of expertise. The lack of true educators in the field may lead to misinformation and missed opportunities for savings.
Here is an example of potential savings for a building owner:
- A Business Owner acquired a commercial property valued at $3,500,000 five years ago, but never completed a Cost Segregation Study. Working with us, the client realizes he may still have the opportunity to benefit.
- Our Business Solutions team studies his case, and identifies 20% ($700,000) of components that should have been allocated to 5-year life instead of 39 years.
- The Business Owner is excited to learn that the IRS will allow him to “catch up” $700,000 of missed accelerated depreciation on his next tax return!
If you own a building and have not had a Cost Segregation study performed, contact us today. Now that you know the truth, let us help you discover how much you qualify for. Hundreds of thousands or even millions of dollars in tax savings may be available to you.
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