If you own real estate, are you managing these assets to maximize available tax benefits? Cost segregation is a strategy that can be used in tax planning if you have purchased, constructed, or remodeled real estate. Ownership of these properties can defer income taxes on both a state and federal level. Additionally, depreciation deductions can be accelerated with the right strategies.

How Cost Segregation Works

Not only do you own the real estate building structure, but the exterior and interior components are part of the ownership. Between 20 – 40% of these components can be categorized through cost segregation to increase property depreciation. Various structural components are separated, including everything from the HVAC system to the windows, roof, and even electrical outlets. When these building components are replaced, then a loss deduction can be claimed.

A Cost Segregation study separates the property-related costs, breaking them down into groups that can be depreciated over 5, 7, and 15 years. In comparison, standard depreciation for the building as a whole would typically be calculated over 27.5 – 39 years. The first few years of asset ownership can be leveraged by front-loading your depreciation deductions during this time.

This real estate management strategy can be used to free up cash more quickly through deferrals and tax deductions. Then, the cash can be used for immediate reinvestment.

Do You Need Cost Segregation Services?

You can have cost segregation completed any time after purchasing, constructing, or remodeling a property. For optimal benefits, it is best to complete the cost segregation study during the year you are investing in the property. Every situation is unique, which is why custom planning is essential if you want to maximize your tax deductions.

We offer support through all stages of cost segregation planning, including an analysis to determine the optimal segregation time for your investment. If you are looking for ways to optimize your tax strategy, then our team at ReFOCUSed Business Consulting is here to assist. We offer full-service solutions, including tax accounting experts and knowledgeable construction providers. Schedule a consultation to see how much your business can save using this tax strategy.