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Cost segregation is a tax strategy that can help businesses save money on their taxes. By reclassifying construction or acquisition costs between real and personal property, businesses can accelerate depreciation schedules and thus the present tax benefit. The result is that every $1,000,000 of personal property produces a present value tax benefit of approximately $220,000, making real estate cost segregation a strategic tax tool.What are Cost Segregation Studies?
Cost segregation studies are a way to reclassify construction or acquisition costs between real and personal property. This allows real estate holders to accelerate depreciation schedules and thus the present tax benefit. The result is that every $1,000,000 of personal property produces a present value tax benefit of approximately $220,000, making real estate cost segregation a strategic tax tool. Cost segregation studies can also be used to increase your sales tax exemptions, lower your property taxes, and provide the basis for your property records system. However, the level of complexity is high, so it is best to hire a professional cost segregation consultant.
Benefits of Cost Segregation
There are a number of benefits to conducting a cost segregation study. These benefits include:
Increased tax savings: By reclassifying construction or acquisition costs between real and personal property, businesses can accelerate depreciation schedules and thus the present tax benefit. The result is that every $1,000,000 of personal property produces a present value tax benefit of approximately $220,000.
Increased sales tax exemptions: Cost segregation studies can help businesses identify assets that are eligible for sales tax exemptions.
Lowered property taxes: Cost segregation studies can help businesses reduce their property tax assessments.
Improved property records: Cost segregation studies can help businesses create more accurate and detailed property records.
How to Work with a Cost Segregation Consultant
If you are considering conducting a cost segregation study, it is important to work with a qualified cost segregation consultant. A cost segregation consultant can help you identify the assets that are eligible for cost segregation and prepare a cost segregation study that meets the requirements of the IRS.
Common Myths About Cost Segregation
There are a number of common myths about cost segregation. These myths include:
Cost segregation is only for large businesses. Cost segregation can be a valuable tool for businesses of all sizes.
Cost segregation is expensive. Cost segregation studies can be a cost-effective way to save money on taxes.
Cost segregation is complicated. While cost segregation can be complex, it is important to work with a qualified cost segregation consultant who can help you navigate the process.
Conclusion
Cost segregation is a strategic tax tool that can help businesses save money on their taxes. By reclassifying construction or acquisition costs between real and personal property, businesses can accelerate depreciation schedules and thus the present tax benefit. The result is that every $1,000,000 of personal property produces a present value tax benefit of approximately $220,000. If you are considering conducting a cost segregation study, it is important to work with a qualified cost segregation consultant.