Whether you have owned a piece of commercial property for some time or you recently have purchased commercial property, no doubt you are trying to think of some ways that will save you some money. It can be very expensive to purchase and develop commercial property, but there are some savings that you may now know about. If you are looking for a way that can save you thousands of dollars, you need to know about cost segregation. While investors may not want you to know about this excellent way for you to save, you need to know about it and understand it so you can reap the benefits of cost segregation.



What is Cost Segregation?

You may have never even heard the name cost segregation before, but you may have heard of component depreciation studies or of investment tax credit studies, which are essentially the same thing as cost segregation under a different name. Cost segregation is a tool that can be used for tax savings. This tax savings tool is available to people who have purchased, remodeled, expanded, or constructed real estate. Cost segregation can help these people to increase the amount of cash flow they have by deferring both state and federal income taxes and expediting their depreciation deductions as well.

History of Cost Segregation

Cost segregation is really not something that is new, although many people have never heard of it before. You can trace cost segregation all the way back to the 1960's and there is a very diverse history of court cases surrounding this topic as well. Over and over again the courts have ruled on the side of property owners, allowing them to take into account the costs associated to the assets that they hold, thus helping them enjoy very helpful tax breaks. Recently, in both 2001 and 2003 the new tax acts made cost segregation even more of a benefit to those who use it. Now you can actually use cost segregation for previous years as well, which allows you to really cash in on what you have spent on commercial property.

The Benefits of Cost Segregation

There are a variety of excellent benefits that you can enjoy by having cost segregation studies done. First of all, you will be able to enjoy an increased cash flow, since you will be able to take advantage of various tax benefits, which are achieved by accelerated depreciation. The accelerated depreciation can also help you to enjoy increased net present value as well. When you have a cost segregation study done for your property, you will then be able to have a study and analysis that has been done by a third party. This will make sure that you have studies that the Internal Revenue Service will accept and that will withstand any in depth examinations they may do on the studies as well. Even though you may have to pay for the studies that are done, the tax savings you can enjoy will more than pay for them being done.

Who Provides Cost Segregation Services?

If you are already using a tax CPA to help you with the financial side of your business and your property acquisitions, your CPA may actually recommend that you have a cost segregation study done on your property so you can save some money. Even if you have purchased the building in the past few years, you may be eligible for these tax savings. Usually, a CPA can actually recommend a company that performs these studies to you. Be sure that you go to a qualified company for these studies because it is very likely that the IRS is going to want to take a look at the studies to make sure that they have been accurately completed. It is important that the studies that are done on your property includes land, personal property, building components, and land improvements.

If you make use of cost segregation, you can save thousands of dollars and enjoy various great tax benefits as well. Cost segregation can provide you with write offs that are much easier and accelerated depreciation deductions can be extremely helpful as well. Whether you are purchasing a new piece of commercial property, doing new construction on your commercial property, or even if you have just recently sold one you can enjoy some of these excellent tax benefits. This is especially helpful to those who spend a great deal of money, and it is recommended that you have a cost segregation study done if you have spent more than $750,000 in relation to your commercial property.

Sadly, there are many people who own commercial real estate that are not taking advantage of cost segregation. They could be saving thousands of dollars, but many fail to take advantage of it because they do not understand the benefits of using it. This secret can actually save you thousands, so be sure that you take advantage of cost segregation and start saving on your commercial property.