what can cost segregation do for me?€¦ · cost segregation study. the engineered cost...

WHAT CAN COST SEGREGATIONDO FOR ME?Cost segregation is a powerful tax planning method that uncovers huge savings for owners of commercial real estate.

The New York Times“By ignoring generous IRS guidelines whenestablishing depreciation schedules, 90%of real estate investors are unintentionally

overpaying taxes.”

The Benefits of Cost SegregationEngineering based cost segregation studies allow commercial real estate owners to take assets that are considered to be real property assets and reclassify them as personal property assets.

Real property assets are depreciable over a 39 year period, where personal property assets aredepreciable over 5 and 7 years.

This reclassification accelerates your depreci-ation period, which decreases current and past tax obligations, thus increases your cash flow.

What this could mean for youThe IRS allows you to make a simple change to your method of depreciation to account for a cost segregation study.

The government also allows taxpayers to catch up on all previous years for items reclassified into shorter depreciation lives as a result of a cost segregation study.

The engineered cost segregation study meansmore cash flow for you and your business.

On a building purchased or built for $2,500,000 the owner can dramatically reduce their current tax liability.

The Engineered Cost Segregation Study in-creased the depreciation by over $615,000 through 7 years, resulting in a tax reduction of over $215,000, leaving the property owner the additional $215,000 to use as they desire.

The Journal of Accountancy States that:

“Each $100,000 in assets reclassified from a 39-year recovery period to a 5 yearrecovery period results in approximately $22,000 in net present value savings,

assuming an 8% discount rate and a 40% marginal tax rate.”

John P. Power CPA - Power Financial Group, LLCph: 701.255.7259 fx: 701.255.2213

john@powercpa.net www.powercpa.net

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Before CS After CSStraight

DepreciationAcceleratedDepreciation

Year 1 $64,000 $280,000Year 2 $64,000 $226,000Year 3 $64,000 $156,000Year 4 $64,000 $127,000Year 5 $64,000 $108,000Year 6 $64,000 $87,000Year 7 $64,000 $79,0007 Years

Total$448,000 $1,063,000