Riverside TACS is Your Cost Segregation Specialist
Request A Call
Accelerate Depreciation
.jpg)
Give us a call: 718.252.4200
In general, real estate is depreciated over either 27.5 years or 39 years depending on whether the property is residential or commercial. Through the performance of a cost segregation study, a significant portion of the real estate may be reclassified for tax purposes and depreciated more quickly resulting in tax deferral, increased cash flow and present value savings.
The value of a cost segregation study can be illustrated by the following example.
Taxpayer purchases building for $4.75 million excluding the land. If the taxpayer does not undertake a cost segregation study, the building will get depreciated over 39 years. After five years the taxpayer will have accumulated $603,900 of depreciation.
If a cost segregation study is undertaken, then eligible assets may be reclassified to shorter depreciation periods. In this example assume as follows:
- Property reclassified to 5 year personal property = $200,000
- Property reclassified to 7 year personal property = $300,000
- Property reclassified to 15 year land improvements = $475,000
The reclassification results in additional depreciation over the first five years of $476,515.
Assuming a 40% rate of tax, the five-year tax savings equals $190,606.
Assuming an 8% discount rate, the present value tax savings over the first five years is $167,326.
As you can see from the example above, a cost segregation study can yield significant benefits.
Let the experts at Riverside TACS help you Minimize Tax and Maximize Returns!