Real Estate Investment Trusts and other savvy investors save phenomenal amounts on their taxes that less sophisticated investors generally don’t enjoy?
How do they do it? Cost Segregation.
Are you using cost segregation methods to depreciate your property? If your answer is “no”, then you may be missing out on thousands of dollars in tax breaks.
Ninety percent of apartment building owners are not using cost segregation, according to Michael Donohue of Cost Segregation Services, Inc. But the 10% who do are paying less in taxes and enjoying greater cash flow from their property.
What is Cost Segregation?
A Cost Segregation Study analyses all the components of your property and assigns the costs associated with them to their correct, shorter depreciation lives. Instead of depreciating the entire property over 27.5 years, your accountant will now be able to depreciate significant portions over 5, 7 and 15 years. The balance, the structural components of your building, will continue to be depreciated over 27.5 years.
How Do I Know If I Qualify for Cost Segregation?
- Did you pay over $750,000 for your building?
- Have you owned the building for less than 15 years?
- Do you plan on holding it for at least 2 more years?
- Do you have, or shortly plan to have, a tax liability?
If you answered Yes to the questions above, and you are not using cost segregation, you are probably overpaying your taxes.
How Do I Get Started with Cost Segregation?
Get a free cost segregation Preliminary Analysis. This analysis predicts the after-tax dollars hidden in your property. It should also quote the cost of the actual, paid, Cost Segregation Study, required by the IRS.
Should your accountant or tax preparer have any questions about how to apply the benefits of cost segregation to your specific tax situation, they can speak to CPAs and tax attorneys at your cost segregation firm.
How To Choose a Cost Segregation Firm
When you select a cost segregation firm, you should insure that they meet the IRS guidelines for firms that are qualified to perform Cost Segregation Studies.
- They should also be willing to attend an audit, at your location, at no-charge, should their study ever be questioned by the IRS.
Cost segregation is an engineering discipline. The firm should offer practitioners that keep on top of changing legislation, IRS regulations and court decisions. Beware of ‘contingent’ or ‘low’ fees. Cost segregation is not cheap, but the benefits can be astounding.
Remember, it is you, and your existing financial team, who will make the final decision to commission a paid Cost Segregation Study. The no-charge Preliminary Analysis will give you all of the facts needed to make that decision.
To order your Free cost segregation analysis, send your name and contact information to [email protected].
American Apartment Owners Association offers discounts on products and services related to your commercial housing investment including REAL ESTATE FORMS, tenant debt collection, tenant background checks, insurance and financing. Find out more at www.aaoa.com.
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