Capitalizing on cost segregation: How to accelerate tax deductions for commercial real estate owners

Real Estate | 28 Jul |

Time is money, and if you own commercial real estate with real property that costs at least $500,000, a cost segregation study could free up cash for you as soon as you file your next tax return.

BeachFleischman provides cost segregation services to clients nationwide, and we have offices in Phoenix and Tucson, Arizona. We consult with commercial real estate owners to increase cash flow, reduce their tax liability and verify missed deductions. We have the experience and technical knowledge to perform studies with favorable results that comply with IRS guidelines. Additionally, our professionals are well-versed in real estate tax law, tax depreciation, and cost segregation tax issues. We collaborate with qualified engineers to ensure our clients receive the maximum allowable tax benefits on every study that we perform.

Why invest in a cost segregation study?

Ashley T. Byma is a Tax Senior Manager for BeachFleischman.

• A cost segregation study is specialized method of accelerating depreciation on commercial real estate property, generating increased cash flows.

• An engineer performs a site visit of the property to determine how portions of the building can be reallocated into shorter depreciable lives (such as 5, 7, and 15 years); as compared to the typical 27.5 and 39-year depreciable lives assigned to residential and non-residential commercial property, respectively. 

• By reallocating portions of the original depreciable life into shorter-lived property, significant tax savings & cash flow are generated from this accelerated depreciation. Estimate your property’s tax savings using our Cost Segregation Calculator.

• BeachFleischman provides full-service cost segregation studies. We implement the study from beginning to end by coordinating with the engineers and delivering comprehensive results ready to incorporate into your tax returns.

How much can the tax savings be worth?

• The tax savings will vary depending on the building’s structure, how it’s used, and when it was placed in service. These factors will impact how the depreciable lives are reallocated.

• If the property was placed in service several years ago, the reallocation of depreciable lives can typically be adjusted in the current year without amending prior tax returns. This can result in immediate tax savings for the owner(s).

Try our Cost Segregation Calculator to find out how you can create significant cash flow in the form of tax savings.

• Below are sample study results from our calculator for a $1,500,000 apartment complex placed in service in December 2020. The 2020 tax savings are approximately $143,000.

• Below are sample study results from our calculator for a $800,000 retail building placed in service in January 2018. The 2020 tax savings are approximately $63,000.

Who is a good candidate for a cost segregation study?

• Any tax-paying owner of a commercial property can potentially benefit from a cost segregation study.

• As the 100% bonus depreciation deduction begins to phase out in 2023, it’s more important now than ever to consider a cost segregation study.

Try our calculator, or let us prepare a complimentary cost segregation feasibility analysis for you to determine your potential benefits of having a cost segregation study completed. For more information about our cost segregation services, visit us at http://www.beachfleischman.com/costsegregation or contact Ashley Byma at abyma@beachfleischman.com.

 

Ashley T. Byma is a Tax Senior Manager for BeachFleischman and a licensed CPA in Arizona. In addition to leading the firm’s cost segregation service line, Ashley provides accounting and tax services for a variety of privately held companies.

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