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Cost Segregation Studies

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A Powerful Tax Saving Strategy

for Commercial and Investment Real Properties

What is Cost Seg?

 

Cost Segregation is a highly beneficial and widely accepted tax planning strategy utilized by commercial real estate owners and tenants to accelerate depreciation deductions, defer tax, and improve cash flow. Once used only by big-4 type accounting firms and the nation’s largest real estate owners, this practice has now become routine for commercial property owners of almost every size.

 

A Cost Segregation Study (CSS) is based on a detailed engineering-based analysis that is used to support the acceleration of depreciation deductions by identifying costs that can be allocated to shorter recovery periods; primarily 5, 7, and 15-year, as opposed to 27.5 (residential rental) or 39-year (commercial).

 

A quality study provides the documentation needed to defer substantial tax payments and greatly improve cash flow. It is important to note that a cost segregation study does not create new deductions, but increases deductions in the early years of ownership. This front-loading of depreciation allows the taxpayer to take advantage of the time value of money.

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The Benefits

 

There are a number of benefits associated with Cost Segregation and its various applications. The primary benefit of course is significantly improved cash flow. This is most often achieved through the acceleration of depreciation deductions and the resulting tax deferral. In addition to the impact of accelerated depreciation, cost segregation may also allow for:

  • Reduction of estimated quarterly tax payment

  • Property tax savings

  • Transfer tax savings

When prepared correctly, a Cost Segregation Study can also be an excellent asset management tool.

 

With the recent release of the IRS Tangible Property Regulations, a well prepared CSS can serve as the basis to provide defensible values for Asset Retirement or Unit of Property determinations.

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The U.S. federal tax law provides a benefit up to 20% in the form of a non-refundable tax credit for companies that engage in qualified research and development activities. The credit, if used, can create immediate cash flow by reducing tax liability dollar for dollar. While non-refundable, the credit can be carried back one year and forward twenty years for any excess credit not used in the current year. Additional cash flow can be realized by looking for credit opportunities in any open tax years (currently 3 years).

 

Qualifying Activities:

  • Developing New or Improved Product

  • Developing New Technology

  • Creating a New Production Process

  • Improving Current Processes

  • Developing or Improving Software

  • Developing Prototypes or Models

  • Select Developed Software

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It is important to remember that nearly all businesses have potential benefit to claim the R&D tax credit. Any business that is currently improving or creating new or improved products, processes, or technology has potential to take advantage of the credit.

 

The R&D tax credit is one of the most beneficial federal tax credits offered currently. The R&D tax credit is both a federal and state incentive, with roughly 70% of states offering a credit.

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Rebates and Incentives

 

Most utility companies are offering rebates for energy efficient equipment installed in remodeled, as well as newly constructed buildings.  In addition there are multiple grants available in various areas to help fund energy efficiency projects as well as tax credits for renewable and efficiency.

 

Depending upon your location, utility rate, and type of facility, you may be eligible for one or more incentives.

 

Let our team of energy experts assist you in procuring all the incentives for which you may qualify. We’ll take the headaches out of the paperwork - which can be a nightmare, by filling out all necessary applications and forms, and perform as your liaison between utilities and any other agencies involved.  We’ll take care of the red tape ... you just cash the check!

 

Consulting

 

“Greenwashing” these days has become quite prevalent. There are a lot of folks out there talking energy and jumping on the efficiency bandwagon. Unfortunately, many of them are misinformed, inexperienced, or simply trying to sell you their product.

 

Our energy team has over 25 years of experience in the energy engineering field. From working with the Department of Energy’s National Energy Conservation Policy Act and the Institutional Conservation Program in the nineties, which offered grants to schools and hospitals to improve energy efficiency and reduce costs, right up to vetting the newest LED products on the market, we’ve seen the progression of energy engineering through objective eyes.

 

We sell no product, nor endorse any particular brand or manufacturer.

 

If you need unbiased advice on the best lighting or HVAC systems for your particular business, or if you have questions about recommendations, products, practices, interpreting energy bills, or any other energy related issue, you can rest assured we will provide you with objective and informed answers.

 

Let our team of energy experts assist you in making the best energy choices to custom fit your situation.

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