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  • Reggie Blackwell

Cost Segregation Will Reduce Your Taxes

Cost Segregation is an advanced tax planning strategy that allows individuals and companies who have constructed, purchased, or remodeled real estate to increase vital cash flow by accelerating depreciation deductions and deferring federal and state income taxes. When property is purchased, it includes the building structure and its interior and exterior components. Without any tax planning consultation the entire amount allocated to the building would be allocated to either 27.5yr or 39 yr property. For example if a client purchase a building for $1 million, he would have an annual tax deduction of $29,641 ($1 million ÷ 39).

Based on PMG Intrinsic’s experience, we have found that approximately 30% – 40% of the components interior and exterior components fall into categories that could be written off much quicker than the automatic default classification of the building structure. A proper Cost Segregation study done through PMG Intrinsic would identify all property that con be depreciated over 5, 7, and 15-years. For example, parking lots can be depreciated over 15-years. Even more valuable, recent changes to the tax law have significantly increased the benefits to cost segregation. The Tax Cuts and Jobs Act increased bonus depreciation from 50% to 100% on certain qualifying assets. Real estate investors may immediately expense certain 5, 7, and 15-year property. PMG intrinsic works with cost-segregation specialists that perform nonintrusive and detailed engineering studies of a building’s, architectural costs, ceiling, flooring, HVAC, electrical, telecommunications systems, fixtures, signage and parking lot. In addition to providing lower taxes, cost-segregation can benefit real estate investors in two significant ways: 1. Maximize tax savings by adjusting the timing of deductions. 2. Unlock opportunities to reduce real estate tax liabilities and certain sales and use taxes. Contact PMG Intrinsic to unlock these savings immediately.

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