Real Estate Tax Planning

Property ownership has many tax advantages. Unfortunately, many owners don't know what they are or how to apply them. At Cook Martin Poulson, we understand Real Estate accounting and tax planning. We can be your partner to make the most of your Real Estate investment. Call us today and see how we can help you.

A common example is the concept of "cost segregation," which allows you to break out different aspects of your property costs and depreciate them at different rates. Properly applied, cost segregation can help you accellerate and increase depreciation costs, providing significant tax savings. Take a look at the explanation and example below.

Cost Segregation

First of all, what is Cost Segregation?

• It's a detailed study or analysis of the cost of new or existing properties or improvements.
• It identifies separate components of the property that can be depreciated over shorter lives (5 years, 7 years, and 15 years vs. 39 years).
• Cost Segregation can enable accelerated federal depreciation and therefore result in substantial net present value savings.

Can you could benefit from a cost segregation study?

Answer the following questions to find out if a cost segregation study is right for you:

• Do you own commercial property or leasehold improvements constructed or purchased in the last ten years?
• Are you paying federal income taxes?

IF NOT, then...

• Have you paid income taxes in the past that you would like to have refunded?
• Would you like to defer potential income tax liability you anticipate arising in the next few years?
• Would you like to improve your cash flow by accelerating your tax depreciation deductions?
• Would you like the potential benefit of writing off personal property, purchased with the building, when it becomes worthless?

If you answered yes to any of the above questions, then we should talk. Contact us today for a free proposal.

Is Cost Segregation New?

No, not for large businesses, but recent court rulings and changes in the IRS’s mindset have opened the door to the medium and small business owner. The use of accelerated depreciation expense deductions is now available to all taxpayers under existing tax law. But don’t blame your accountant if you haven't been doing this. Without an engineering-based cost segregation study, which includes a detailed analysis of your building by a qualified professional, accountants cannot maximize your benefit.

Do I have to change accountants to take advantage of this?

No. We partner with your existing accountant and provide your CPA firm with more precise information, enabling them to provide you with the greatest tax benefit allowed by law. Most traditional accounting firms can’t provide these services because they lack the engineering expertise to properly analyze construction drawings and develop engineering cost estimates.

How much tax savings can a cost segregation study by Cook Dorigatti Consulting, LLC provide you?

The following table presents sample tax savings per $1,000,000 of depreciable assets. Benefits shown reflect improved cash flow in the first year, over the first three years and total net present value of tax savings (i.e., increased cash flow) over the life of the commercial property.

(a) First year tax savings computed using half-year convention.
(b) Total undiscounted tax savings for the first three years after being placed in service.
(c) Total net present value of tax savings (cash flow) over the 39 or 27.5 year life of the commercial property.