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What is Cost Segregation for U.S. property owners?, Frequently Asked Questions
Cost segregation is the IRS approved method of re-classifying components and improvements of your commercial building from real property to personal property. This process allows the assets to be depreciated on a 5, 7, or 15-year schedule instead of the traditional 27.5 or 39-year depreciation schedule of real property. Thus your current taxable income will be greatly reduced and your cash flow will increase.A special report entitled, Cost Segregation Applied, reviews the practice of cost segregation.Property owners and managers can request a FREE analysis by emailing the information below to: information@boutiquelodgingassociation.org and putting "Cost Segregation" into the Subject line or contacting our specialist:Lou MowbrayPhone: 818-703-7209 / Cell: 818-416-8568Email: lmowbray@costsegreps.com.1. Contact Name2. Owner Name3. Email4. Phone Number5. Property Type ( i.e.retail, commercial, residential)6. Property Address7. Date the Building was Acquired (if new, the occupied date)8. The Building Cost at time of purchase (excluding land cost)9. Improvement Cost Does my property qualify? Yes, if you: 1.) Purchased, constructed, or remodeled property after Jan. 1, 1986 and 2.) Anticipate holding the property for at least a few years Why haven't I heard of cost segregation? Cost segregation was first applied and performed by major accounting firms with in-house cost segregation departments on the largest properties of their most significant clients. One study originally cost upwards of $100,000. We've developed, through a partnership with CSSI, the methods and protocols to deliver this same service to boutique & lifestyle property owners at very affordable rates. This means you can take advantage of this tax savings that was once only enjoyed by the owners of exceptionally large properties. Can I benefit from a Cost Segregation Study? Yes. Let us provide the necessary data to your advisors to determine potential tax benefits. When should a study be done? It is best to have a study completed for the year the building or improvements are placed in service. However, IRS Revenue Procedures allow taxpayers to "catch up" on the depreciation that was not claimed from the first day the property was placed in service without amending prior years' tax returns. Furthermore, the IRS recently allowed for the "catch up" period all in the first year rather than over four years, when the Revenue Procedure 99-49 was first introduced. A cost segregation study can be performed on any property constructed, acquired or remodeled since Jan. 1, 1986. Why should I perform a Cost Segregation Study? Without a Cost Segregation Study your accountant will only be able to use straight line depreciation, 39 or 27.5 years. A Study provides your accountant with accurate information to establish 5, 7, 15, and 27.5 or 39-year depreciation schedules, which substantially increases tax savings in the earlier years of owning your property.
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