Added Tax Benefits of Cost Segregation

[Julio Gonzalez]

Cost segregation is an amazing tax savings tool. Many know the standard benefits such as accelerated depreciation and bonus depreciation. But did you know that there are multiple other added tax benefits of a cost segregation study?

Some of the additional benefits include:

• Reduction in current tax liability
• Insurance savings
• Immediate increase in cash flow
• Minimization of recapture upon sale of the asset
• Identifying disposition expenses
• Identifying repair and maintenance expenses
• Energy cost savings
• Construction tax planning
• Preservation tax credits (historical and new market)
• Fixed asset review
• DEIRA Reports (reduces insurance premiums, benchmarking reports, energy audits and reserve studies)

Depending on the state in which you own the property, you may also qualify for state tax

deductions or credits which can be identified with a thorough cost segregation

study.

Real Estate is such a unique type of investment and pairing it with cost segregation makes it even more unique. You could buy stock...but you can’t expense that. Bonds? Can’t expense those either. Funds? Nope, no expensing allowed. The gift of real estate. You buy it, you get to expense it, it generates income and hopefully appreciates in value. You combine investing in real estate with the power of expensing the building with a cost segregation study is magical!

What additional tax benefits have you found through the use of a cost segregation study?

[Jason Bott]

Quote from @Julio Gonzalez:

Absolutely, @Jason Bott! I'm going to quote one of the blogs on my website. Let me know if you have any questions -

"An Engineered Cost Segregation Study gives the ability to substantiate the replacement costs to the insurance carrier. This enables an insurance agent to go to their underwriters for the most aggressive pricing. The underwriter will have a very high comfort level of the risk due to the comprehensive building review in their file.

What if something happens to your building? I am sure we have all played the insurance game and it can be quite frustrating trying to collect for what you need to replace or repair.

A cost segregation study can serve as a substantive document that an owner can use as support to a claim that is being disputed to their favor. The depth of our reports helps an owner to avoid the need to hire a third party professional to justify their claim.

To an underwriter this becomes a disclosure safeguard whereby at time of claim the owner is able to substantiate a full disclosure position with the insurance adjuster which puts the onus on the carrier to pay!"

 Julio, thank for the explanation.  I haven't heard of this strategy before, but it definitely makes a lot of sense.