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COST SEGREGATION DETAILS FOR REAL ESTATE INVESTORS

 



Cost segregation is a highly beneficial and widely accepted tax planning strategy utilized by real estate investors to increase cash flow.  Cost segregation studies can benefit taxpayers who purchase, construct, expand, or renovate real estate property.  A study can take the cost of each component of a qualifying real estate investment and reclassify and break it down among shorter recovery periods; in turn, you can accelerate depreciation and increase cash flow. 


WHAT IS COST SEGREGATION:


Cost segregation is a highly beneficial tax planning strategy utilized by real estate investment companies to accelerate depreciation deductions, defer tax and improve cash flow.  Cost segregation studies can benefit taxpayers who purchase, construct, expand, or renovate real estate property.  A study can take the cost of each component of a qualifying real estate investment and reclassify and break it down among shorter recovery periods; in turn, you can accelerate depreciation, uncover missed deductions, reduce tax liability, and increase cash flow. Accessing these benefits may be challenging without the help of a cost segregation study.


BENEFITS OF COST SEGREGATION:


As mentioned above, cost segregation can reduce taxes, and greatly increase the cash flow of a property, especially in its early years of operation. 


Cost segregation is a conservative, proven and IRS-defined approach for depreciating commercial properties. The increased depreciation realized through a quality cost segregation study has a real-time, positive impact on your bottom line. 


BENEFITS:


Increase in cash flow

Reduction in current tax liability

Deferral of Federal Income Taxes

Ability to recapture past years


WHO DO COST SEGREGATION STUDIES BENEFIT:


Cost segregation studies are not right for everyone. They are typically used by commercial real estate investors or rental property owners with significant real estate activity that would benefit from a notable reduction in their federal income tax rate.


Thus, you can reclassify a portion of your assets as personal property instead of real estate property in order to depreciate them for tax purposes. This lessens your tax burden, thereby leaving you with more profit. 
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