Reliable Cost Segregation Analysis by Specialty Tax Professionals
Make your real estate investments work for you sooner rather than later.
Cost segregation is a commonly used tax planning strategy and a smart way to increase cash flow by accelerating the depreciation of commercial building costs. Many businesses overlook cost segregation, but it can save a company thousands of dollars a year.
A cost segregation (“cost seg”) study is an in-depth engineering analysis of the depreciating value of long-term fixed assets, like newly constructed buildings, property acquisitions, and renovations. This data allows companies to accelerate tax deductions and improve their cash flow.
A quality engineering-based cost segregation study from Tri-Merit allows building owners to write off their buildings (new and existing) in the shortest amount of time permissible under current tax laws. The favorable depreciation rules contained in the Tax Cuts & Jobs Act (TCJA) create incentives for the greater use of cost segregation studies.
It’s important to work with a partner that has the right experience and can deliver a quality study that meets all IRS guidelines—a partner like Tri-Merit.
Why invest in a cost segregation study?
A cost segregation analysis can reduce a company’s taxable income for several years and improve its cash flow. The main objective is to move components of a property from “long tax life categories” to “short tax life categories.”
If these components belong to short tax life categories, they acquire a higher depreciation rate during the early years, decreasing the company’s taxable income. The business, therefore, has larger financial resources.
Take note that cost seg services don’t create new deductions. Instead, cost segregation increases tax deductions during the early years of the business. By front-loading deductions today, businesses have more money to invest in expansion, process improvement, and research and development tomorrow. Furthermore, companies are better placed to take advantage of the time value of money.
How does a quality cost segregation study reduce tax liability?
Buildings are typically depreciated over a period of 39 years (commercial) or 27.5 years (residential). However, cost segregation studies allow property owners to categorize certain components, like electrical and plumbing systems, into shorter depreciation periods of 5, 7, and 15 years. This reclassification leads to reduced tax liabilities in the short term.
At Tri-Merit, we conduct thorough assessments of your assets, including new acquisitions and improvements, to identify all eligible components for accelerated depreciation.
Our detailed cost segregation report will help you or your client calculate these deductions and provide essential documentation during IRS audits. By implementing an effective cost segregation analysis, we minimize tax liabilities, resulting in lower estimated quarterly tax payments and enhanced savings on property and transfer taxes. Overall, a well-executed cost segregation study is a valuable tax strategy for businesses that own or have recently acquired properties, often yielding savings that far exceed the study’s cost.
What types of commercial properties qualify for a cost segregation study?
Our cost segregation studies assess assets across various industries, acknowledging that different industries have unique requirements. Whether you’re purchasing an existing building, building a new one, expanding, renovating, or making leasehold improvements, a cost segregation study can offer significant benefits. Even if the building was acquired or improved years ago, you can still secure depreciation deductions without needing to amend previous tax returns.
Our clients include but are not limited to:
