What Is a Cost-Segregation Study (CSS)?
Paul Levine
Commercial Real Estate Advisor and Managing Member @ LS Property Partners LLC| Retired CPA with over 50 years of income tax experience that no other Commercial Realtor has, Income Tax Consultant and unmatched Creatively!
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Today, I would like to take us back to some basics because we’ve had a nice run with other topics, but we can NEVER forget our roots. One of the biggest things that I can do for you and others who “know their stuff” can help you is getting you substantial income tax benefits through bonus depreciation. It still amazes me that there are so many people who still do not know this stuff but, Cost Segregation Studies are an amazing tool to save substantial income dollars and change your cash flow for many years to come. And it goes for ALL TYPES of real estate investments. It doesn’t matter if you are into multifamily housing, self-storage facilities, strip malls, even single-family homes that you rent out (if you have enough value there), or any other type of real estate investment, you can, and should take advantage of the benefits of bonus depreciation and a cost segregation study!
A cost segregation study is a valuation process that separates business personal property and shorter-lived business real property improvements from the 27?-year and 39-year buildings. The CSS does not create more depreciation deductions over the long term, but it does provide deductions sooner, which may provide a positive cash flow to help the client pay for the building or even purchase a bigger building.
Why do a cost segregation study?
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The underlying incentive for preparing these studies is the significant tax benefits derived from utilizing shorter recovery periods and accelerated depreciation methods for computing depreciation deductions. Allocating more to personal property results in faster depreciation deductions as it moves property from the 39-year or 27?-year straight-line method to the 15-year 150% DB method for land improvements and the 5-year and 7-year 200% DB method for personal property. Faster depreciation deductions provide earlier tax benefits and net present value (NPV) savings.
My name is Paul Levine, and I am a Commercial Realtor, a Residential Realtor of luxury homes in the greater Los Angeles area, a Real Estate Advisor, an Investment Advisor, and an Income Tax Consultant!!! You can call me at (818) 298 – 4000 after 10 AM Pacific Time Monday through Friday and, yes, even on the weekends. Or you can send an email to me at [email protected] and I will always try and answer you in a timely manner.