The tax attributes of a building are poor. Unlike employee wages or utility bills, taxpayers do not get an immediate tax deduction for the purchase of a building. Residential rental property is depreciated over a lengthy 27.5 years whereas commercial real estate is depreciated even longer over 39 years. However, IRS rules allow non-building components such as personal property and land improvements to be segregated from the building and depreciated more rapidly, generally over 5, 7, and 15 years (click here to learn about depreciation periods and asset class lives). This type of analysis, called a Cost Segregation, drastically improves cash flow by accelerating tax depreciation deductions. Such a study generates benefits typically between 2.5 to 10 percent of the building’s cost.
“Hegg Hospitality engaged ICS to perform a cost segregation study for a hotel that we manage and own. The results surpassed expectations. They made the process as simple as possible, assisting with updating our fixed asset system as well as providing support during tax return preparation. As a result of the study, taxable income was reduced significantly–a true cash savings. There is no substitute to having an engineer by trade involved in a cost segregation study. Thank you ICS team and we look forward to working with you on future projects!”
–Tom Bahrenfuss, Chief Financial Officer – Hegg Hospitality
HOW WE HELP SOUTH DAKOTA TAXPAYERS
Through our South Dakota Office in Sioux Falls, ICS Tax provides free consultations and benefit estimates on all cost segregation studies. Our deliverables are reviewed by one of our in-house Certified Cost Segregation Professionals (CCSPs), which is the high credential in the cost segregation industry.This credential is provided by the American Institute of Cost Segregation Professionals (ASCSP) only to those who have at least 7 years and 7,000 hours of direct cost segregation experience, passed a rigorous exam, and meet ASCSP background checks. We offer free audit support on all of our studies and if applicable, can draft Form 3115, Application for Change in Accounting Method. All cost segregation studies are reviewed and certified by one of our in-house Certified Cost Segregation Professionals.