Cost Segregation
Why Conduct a Cost Segregation Study in Real Estate?
Cost segregation is an essential tax planning strategy that empowers individuals and organizations engaged in the acquisition, construction, remodelling, or expansion of real estate to significantly reduce their income tax obligations. By accelerating depreciation deductions and deferring state and federal taxes, this method delivers undeniable financial advantages.
What Is Cost Segregation and Depreciation?
Cost segregation is an effective tax-saving strategy that classifies property components into their specific depreciation periods—5, 7, 15, 27.5, and 39 years—to maximize savings. Depreciation refers to the systematic deduction of a property’s cost over its useful life, which accounts for wear and tear. This process allows the asset’s cost to be deducted each year until the total amount is fully recovered.
Real estate transactions inherently include both the building structure and various internal and external components. Importantly, approximately 30 to 45% of these components qualify for accelerated depreciation, allowing for faster write-offs compared to the main structure. A comprehensive cost segregation study identifies these valuable components, which typically depreciate over a much shorter timeframe of 5, 7, and 15 years, in contrast to the standard 27.5 years for residential and 39 years for commercial properties. Consequently, a cost segregation analysis is a powerful tool that can significantly boost cash flow.
Mobri Financial LLC’s Approach Cost Segregation in Real Estate
At Mobri Financial LLC, we take a friendly and unique approach to strategic cost segregation. By combining our knowledge of structural, architectural, and civil engineering with an understanding of tax law, we help you identify the components of your property that qualify for accelerated tax depreciation.
Our blend of tax expertise and engineering know-how adds real value to your cost segregation project. Our team visits your building, inspects it carefully, and looks at the different elements to classify them based on their depreciation schedules. We document everything to make the process smoother for your depreciation claims. We are here to support you every step of the way!
When to Conduct a Cost Segregation Study in Real Estate
Cost segregation studies present valuable opportunities that can be undertaken at any time following the construction, purchase, or renovation of a property. However, for new owners, the first year of ownership is an ideal window to engage in this analysis to fully capitalize on its benefits. For investors planning to construct or renovate a building, it is highly beneficial to conduct a cost segregation analysis before the infrastructure is established. Mobri Financial LLC is here to support you with preliminary analyses that will help identify the best timing and strategic approach for your cost segregation study.
Why Cost Segregation in Real Estate Is Beneficial
Individuals and companies often underestimate the substantial tax savings that a cost segregation analysis can deliver. Here are the key benefits you can’t afford to ignore:
Tax Write-Off/Deduction: A cost segregation tax study provides valuable insights by identifying and quantifying your property’s components and improvements that can and should be beneficially deducted during replacement or renovation. It strengthens and maximizes your tax benefits.
Designed to withstand IRS scrutiny: A cost segregation depreciation study provides a powerful independent review of your property, ensuring it can withstand IRS scrutiny while unlocking its full financial potential.
Designed to Boost Cash Flow: A cost segregation depreciation real estate study decisively boosts your cash flow by enabling accelerated depreciation deductions.