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Cost Segregation Studies

Improve your return on investment

If you or your business have constructed, renovated or purchased a commercial property, then a Cost Segregation Study could be invaluable to your short-term cash flow and long-term financial strategy. A Cost Segregation Study (CSS) is a combined comprehensive engineering and financial study applied to a commercial facility, and identifies asset costs that can be assigned shorter depreciable lives.

Generally, an investment in real estate is depreciable over 39 years. CSS allows certain of these costs to be depreciated over 5, 7 and 15 years. This, in turn, accelerates depreciation expense and decreases taxable income. As a taxpayer, you pay less tax during the early stages of a property’s life, providing you with improved after-tax cash flows.

If you had the opportunity to turn a $10,000 investment into a $100,000 net present value, after-tax cash flow, would that be of value to your enterprise? Results like this are achievable through the careful and precise application of a Cost Segregation Study for clients who are regularly in the maximum marginal federal tax bracket and who have constructed, renovated or purchased a commercial facility in the past five years.

A properly documented CSS can help resolve IRS inquiries at the agent level, while improper documentation of cost and asset classification can lead to an unfavorable audit adjustment. Boyer & Ritter’s approach to CSS closely follows procedures outlined in the IRS Cost Segregation Audit Guide.

B&R’s Tax Services Group has completed more than 300 projects, and our experience with these studies indicates that the net present value of the tax benefits provided by a CSS averages approximately 5% of total facility costs, excluding land. Proper identification and allocation of construction-related costs into asset classes with shorter recovery periods is one of the most significant opportunities to reduce your income tax liabilities and improve cash flow.