Tag Archives: save taxes

The Cost Segregation Estate Planning Strategy

12 Oct

estate-planning

If someone dies owning commercial or rental residential real estate, a highly effective tool for reducing the tax burden on the estate might be a cost segregation study.

When a property owner dies. their heirs receive a step up in tax basis to the current fair market value of the property.  Any recapture that the decedent would have been required to pay upon the sale of the property is forgiven.  Using an engineering-based cost segregation study to accelerate the depreciation on the  pre-stepped up cost basis provides a windfall of immediate tax deductions that are never recaptured on the sale.  The estate must, however, act very quickly to take advantage of this benefit.  The study must be conducted and implemented before the due date of the decedent’s final income tax return.

Commercial buildings are normally depreciated over a 39 year period, and residential property is depreciated over a 27.5 year period, straight line.  An engineering based cost segregation study uses accounting and engineering principles to identify non-structural building components that can be depreciated over a much shorter time period (5,7 or 15 years)

The studies do not generally increase the amount of deductions over the life of the property.  By accelerating the depreciation, they generate net-present-value savings.

When this type of study is used in an estate-planning context, a cost segregation study can substantially reduce or eliminate taxes owed on the decedent’s final federal income tax return.  It also avoids a potential disadvantage, namely recapture.

Timing is everything

It is not necessary to perform the cost segregation study before a building owner’s death, but it is vital to complete and implement it before the decedent’s final tax return is filed.  If the deadline is missed, the opportunity is lost, as the benefits of a study cannot generally be claimed on an amended return.

To preserve and maximize the benefits of this strategy, it is vital to identify the opportunity early and to work with a reputable, experienced cost segregation firm that has the experience in implementing this type of strategy.

CSSI – Cost Segregation Services Inc. is the premier cost segregation company in the US.  With over 20,000 studies performed and not one IRS audit caused by our studies, we can help you in all ways to maximize the benefits of an engineering-based cost segregation study.

Contact me today for further information.

4 Tax Tips For Commercial Building Owners

13 Sep

Recently, the regulations for commercial property owners were overhauled in one of the most dramatic changes to the tax law in years.  The Tangible Property Regulations in conjunction with the Tax Cuts and Jobs Act have major economic benefits for building owners as well as some serious compliance issues.

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Properly applying these new U.S. tax code standards can help you capture economic opportunities to the tune of millions in tax savings that flow from your business to your personal taxes.

I would be happy to work with you and your tax professional to make sure you are taking the greatest advantage of these new tax laws.  CSSI, a company that I represent, can be your calculation experts for the following

  1. COST SEGREGATION – The U.S. tax cost method of identifying and classifying building components that allow you to accelerate depreciation and generate additional cash flow. An engineering-based cost segregation study is the basis for allowing you to capture many of the tax saving opportunities below and it helps you maintain U.S. tax code compliance moving forward with these regulations.
  2. BUILDING SYSTEMS VALUATION – An engineering-based study that will identify building systems and structural components.  Going forward every expenditure cannot be expensed.  The new regulations give very specific instructions on whether expenditures should be capitalized as an “improvement” or expensed as a repair.  We will provide the calculations that your tax professional will need to make these important decisions.
  3. CAPITAL TO EXPENSE “REVERSAL” OPPORTUNITY – Building owners may now expense previously capitalized costs and expense them in the current year by applying the new regulations to prior years.  For example, we helped a client receive $1.1 Million in tax savings on one of his properties through this method.
  4. PARTIAL ASSET DISPOSITION (PAD) – Renovate in the current tax year?  Thinking of an LED lighting upgrade?  A PAD allows you to write down the basis of what you removed and the costs for the removal and disposal of those items.  You can receive a tax deduction in the current year but it is a “use it or lose it” opportunity.  Fail to capture it in the current tax year and you lose the ability to write it down.  Both capital to expense reversals and PADs yield a permanent tax savings at the time of the sale by reducing recapture costs.

Let me provide you and your tax professional a no-cost, no-bligation analysis of the benefits you may receive and the cost for this type of study for your property.

Return the following information, and I will prepare your analysis immediately.

 

7 Things a CPA Needs to Consider when Deciding on a Cost Segregation Partner

21 Feb

Including cost segregation into your CPA practice will benefit you and your clients by expanding your business and offering a service requested by many. It is important to know a few things about your potential cost segregation partner. When looking into firms that specialize in cost segregation, you’ll want to make sure they meet a few requirements before you partner with them. You want them to become an asset to your firm. Below, you’ll find a list of questions that you should ask each cost segregation firm before you commit to anything.

  1. Is the cost segregation firm you are considering an expert in the tangible property regulations? Whether your firm has become highly or only partially educated on the Repair Regulations, your cost segregation partner should be able to calculate complex issues for all of your clients who qualify. When a cost segregation firm is an expert in the repair regulations, they will quickly be able to step in as your calculation experts offering immense savings to your clients and potential consulting fees to your firm.
  2. How long have you been in business and how many cost segregation studies has your firm done? It’s good to know the firm’s history and experience in the industry. You need to know that they will be there for your client if an audit occurs.
  3. Who is performing the study? A cost segregation study is a technical process that requires knowledge in both construction and engineering. It’s important to find a firm that performs every facet of the work in-house that goes into the cost segregation.methodsOfAStudy
  4. What method does the firm use to perform the cost segregation study? There are several methods that a firm can use to perform a study but not all are created equal. You want to make sure the firm you choose uses an engineering approach to reduce the risk in the event of an audit.
  5. Does the firm provide a complete report? The study needs to offer the preferred 13-point conclusion. It is important to establish that a report will be made and given to both the tax professional and the client when the study is complete. See U.S. Tax Code Guidelines.
  6. In the event of an audit, who will defend the work? This is important for your client’s peace of mind because they’ll know they won’t have to face an audit by themselves and that the firm will defend its study.
  7. Ask for references. As with any important relationship, references will give you the peace of mind knowing that your cost segregation partner provides on time, accurate, and bullet-proof results.

Expanding your services is an important matter. As a professional, you want to maintain the same level of quality your firm has provided for years when adding another service that includes bringing in outside help. These questions will help ensure you find a cost segregation firm that meets your standards and provides a quality service to the customers that trust you.

For more information or a no-cost property analysis, call me at 888-780-1333

 

About CSSI

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In 10 years, we have completed thousands of CSSI Studies. Our CSSI Studies have been performed for commercial property owners in every state of the U.S. CSSI representatives bring the personal and professional attention that every commercial property owner and their CPA needs to assure the proper engineer-based cost segregation result, according to the U.S. tax code rules.

 

About Cash Flow Strategies, Inc.

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Cash Flow Strategies, a natonal partner with CSSI, is a one-stop shop for businesses and medical/dental practices looking to boost cash flow.  Providing a wide range of services to increase revenue, lower expenses, and cut taxes, Cash Flow Strategies provides a no-cost and no-obligations “Cash Flow Checkup” which will outline potential strategies to maximize cash flow

 

Don’t Miss This Great Business Tax Credit

1 Feb

In 2104, Congress approved a tax credit for businesses as a part of the Affordable Care Act.  Don’t miss out on this tax credit that could save employers thousands, tens of thousands, and even hundreds of thousands each year.

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