A cost segregation study provides the best support for maximum tax depreciation. Personal property (assets) and corresponding costs are isolated from the long-lived building categories. In addition to the shorter depreciation lives, accelerated methods can be applied to the personal property, as well as the bonus depreciation under Section 179. The bonus depreciation is applicable through the tax year 2013.
Are there reasons not to perform a cost segregation for acquired property or new construction? Here are some reasons to question whether to hire the analysis.
- You will sell the building in a short period, say 3 to 5 years.
- Your accountant determines that you have enough expenses or NOL's to shield taxable income.
- The land value is excessively high and/or the building (improvements) very old.
- You are doing a 1031 exchange and the basis is less than $500,000.
- You acquired a building shell and will not spend much on the interior improvements.
When you acquire, improve or build, call us for an assessment of the tax benefit/cost analysis.