Energy Deregulation |
Cost Segregation FAQ
Cost Segregation Testimonials
Cost Segregation Myths
Cost Segregation Partnership
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10 Myths about Cost Segregation Studies:1. My accountant probably did one.Unless it was done subsequent to May 13, 1996 when the tax laws changed, then you are probably depreciating your assets incorrectly.2. A cost segregation study won’t save any money.This is true only if the entity or pass thru entity is losing money and has no ability to either carry back or carry forward the losses generated. Otherwise, the savings generally range from 35% to 46%* of the additional depreciation generated from the study.3. We don’t have any assets to reclassify.Generally, 20-55% of building costs can be reclassified to shorter depreciable lives4. Our chances of being audited will increase.Not according to the IRS. You are filing an automatic change in accounting method (481 adjustments) which the IRS has pre-approved. If Our Cost Segregation Team performs your report we will back up the report if audited.5. There is no support if the IRS does perform an audit.There are over 200 IRS rulings, procedures and court cases which allow for cost segregation studies to be performed.6. We will get the deduction in the future anyway.Yes this is true, but a cost segregation study in effect gives you an interest free loan from the government.7. We are in an alternative minimum tax (AMT) situation and/or the cost segregation study will put us in one.Congratulations! You are probably flush with cash. If this does occur, the savings will be at the 28% federal tax rate and not the 35% to 39% tax rate8. A cost segregation study will complicate estate planning.Yes it might, but the rewards of performing a study have great financial benefits if the owner of the building dies before the building is fully depreciated. If done properly, a cost segregation study is an estate planning home run.9. My CPA has segregated percentages of construction costs based on invoices or contractors application for payment, so our company is already benefiting.Without the contractor/engineer expertise coupled with the tax law guidance, there will likely be valuable tax benefits left on the table. More importantly, this methodology will not withstand IRS scrutiny. Stay away from this type of study. Hire a company that has experience in both IRS case law and structural engineering to maximize the benefits and offers audit defense.10. There is no negative impact to not performing a cost segregation study.This is an incorrect assumption. IRS regulations require that taxpayer compute depreciation on that is allowed or allowable. Therefore, if you improperly depreciate a 7-year asset over 39 years, the IRS could disallow the depreciation on the asset beginning in year 8. In addition, if the building is sold the IRS could increase the gain by reducing the basis in the building by the depreciation that should have been taken in prior years, but was not.Our Cost Segregation Team is a leading provider of cost segregation studies. We offer a unique blend of seasoned tax professionals as well as design and structural engineers. We are not a CPA firm and focus strictly on assisting and supporting CPA ’s around the country to offer their real estate clients, the maximum tax savings from a quality, engineering based study. |