What if you could increase your company’s personal property depreciation time from a typical 39 years to 5-15 years instead? By doing so you could reduce your taxable income, lower your taxes and increase your cash flow.
At C2, it all begins with a qualified cost segregation specialist, an engineer with experience in cost estimating and allocation, preparing a cost segregation study of your building.
Through the course of this study, your property assets will be identified to determine appropriate asset classifications. Capital expenditures typically depreciate over a 27.5 or 39-year period. However, if you reclassify all items attached to the building but not part of the building’s general operation or maintenance such as furniture, flooring, cabinets and even some electrical wiring and plumbing, anything that is not part of the actual structure of the building can often be depreciated over five, seven or 15 years. These are classified as personal property assets and may also apply to items located outside of the building that are part of the land development, such as lighting, paving, sidewalks, and underground utilities.
A cost segregation study allows you to front load the depreciation, and thereby reduces your taxable income for the first five to 15 years of possession. The financial savings may then be used for investment purposes or put back into the company.
Benefits of Cost Segregation
- Increases your tax savings by modifying the timing of deductions. By shortening the depreciation schedule, depreciation expense is accelerated and tax payments are decreased during the first years of a property’s life, instead of prolonging payments over later years.
- Increases cash flow and provides additional cash to reinvest in new projects or pay for current business expenses.
- Provides quicker return on investment (ROI)
Retroactive Cost Segregation Analyses
For older properties, a cost segregation study will allow businesses to receive immediate retroactive savings on properties added since 1987. The entire amount of the adjustment can be taken in the year the cost segregation is completed, providing an increase in cash flow for the current year.