Cost Segregation Services (CSS) are IRS-sanctioned techniques allowing businesses to accelerate depreciation on their facilities. In short, CSS can substantially reduce income taxes by increasing depreciation allowances. However this process is a little more complicated than simply deciding to reallocate assets or claim a shorter depreciation period and then running the numbers yourself. According to IRS guidelines, a properly performed cost segregation study is based on a detailed engineering analysis. It requires a team of architects, engineers and accountants.

SHOW ME THE MONEY
Cost Segregation Service (CSS) Results
No CSS After CSS
Annual Income 10,000,000.00 10,000,000.00
Operating Expenses 5,000,000.00 5,000,000.00
Depreciation Expense 1,000,000.00 3,000,000.00
Net Income 4,000,000.00 2,000,000.00
Taxes (40%) 1,600,000.00 800,000.00

In this example, current year savings after a Cost Segregation Study is $800,000.00. This savings can be reinvested in this business activity or another investment.

So are the savings worth the effort? Well, typically 25 to 40 percent of the assets within a property can be reclassified. This allows you to recover costs over a shorter period of time, which in turn creates a substantial tax savings.

Cost segregation studies analyses Sec. 1250 based assets, which a bound to a traditional 39 year depreciation group and reassigns specific eligible assets into Sec. 1245 property which most often enjoys a three, five or seven year depreciation. This process, based on an engineering study and in accordance with strict IRS audit guidelines, often reduces taxable income thereby resulting in an increase in cash flow. These newly freed funds may be utilized for purposes that are more productive.

Isn’t it time you got a preliminary feasibility study with proprietary software designed to analyze your properties and their depreciation schedule options? Call us to schedule a more in-depth discussion of this service today. Of course, there will be no fee associated with this meeting.