Since 2008, our cost segregation team has been at the forefront of utilizing engineered cost segregation studies to reclassify non-structural components of buildings, allowing for significantly shorter depreciation timelines—5, 7, or 15 years instead of the standard 39 years. This approach often unlocks 25% to 45% in accelerated deductions, creating immediate and impactful tax savings.
Our cost segregation team’s detailed, fully compliant studies not only identify these savings but also provide asset management insights that align with IRS guidelines.
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Maximizing your current financial resources is the essence of each of these tax strategies, but they can be combined for even greater savings, creating more leverage and producing more ROI.
A 1031 exchange allows for deferral of capital gains taxes when selling investment real estate, while cost segregation accelerates depreciation, yielding significant tax benefits. By identifying which parts of a commercial building qualify as personal property, cost segregation shortens depreciation timelines to 5, 7, or 15 years, instead of the standard 27.5 or 39 years. This creates “opportunity capital” that can be reinvested or used in your business.
A formal cost segregation study, conducted by a third party, ensures compliance and identifies components eligible for reclassification. Tax benefits from cost segregation are realized in the year the study is applied and, if necessary, can be retroactively adjusted using IRS Form 3115. These studies also align with regulations governing tangible property, allowing commercial property owners to benefit from deductions on disposed building components.
Cost segregation and 1031 exchanges complement each other as part of a strategic tax plan. Accelerated depreciation from cost segregation boosts cash flow, while a 1031 exchange defers taxes on property sales by reinvesting proceeds into like-kind properties. Repeating this process and applying cost segregation on each replacement property can potentially defer taxes indefinitely, with a step-up basis for heirs minimizing future liabilities.
These strategies are worth discussing with our network of tax advisors, real estate brokers, and financial planners.
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IMPORTANT DISCLOSURE: The tax-related information contained on this site should not be construed as tax or legal advice specific to your situation, and should not be relied upon in making any business, legal or tax-related decision. Please consult your tax or legal adviser for further information. We welcome the inclusion of your tax adviser to further determine what type of capital gains tax strategy works best for your unique set of tax circumstances. This website is neither an offer to sell nor a solicitation of an offer to buy any security which can be made only by a prospectus, or offering memorandum, which has been filed or registered with appropriate state and federal regulatory agencies, and sold only by broker dealers and registered investment advisors authorized to do so. 1031 exchange services are provided by a qualified intermediary that is a wholly owned subsidiary of Accruit LLC, an Inspira Financial solution. The provider of these materials is not an agent or employee of, nor otherwise affiliated with, the qualified intermediary. The above coverages and processes are available through Accruit LLC.
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