IF YOU OWN COMMECIAL REAL ESTATE AND YOU HAVE NOT HAD A COST SEGREGATION STUDY DONE, WE HAVE TO TALK!!!
Paul Levine
Commercial Realtor and Real Estate Advisor | Retired CPA with over 50 years of income tax experience that no other Commercial Realtor has, Income Tax Consultant and unmatched Creatively!
PART I OF II…
First, you have to know what a Cost Segregation Study is and what it does for you.? When you purchase real estate for any money-making reason, you are buying three things.
You are buying the land that has been there since the beginning of time and it will be there until the end of time, and that’s not depreciable.
You are buying the structure which is comprised of the walls and the ceiling and the floors.? If you are buying “Residential Real Estate” then you will depreciate it, according to the Internal Revenue Code, over 27.5 years.? If it is “Non-Residential Real Estate” like an office building or a self-storage facility or a theme park. You will depreciate it over 39 years.? And you will use the straight-line method of computing the depreciation.
And you are buying Tangible Personal Property that you don’t have a chance in hell of identifying yourself.? That’s why you have a Cost Segregation Study performed on the property by a team of Engineers, not accountants, to identify the property and determine if the property is 5 or 7- or 15- year property.? That means that you will depreciate some of these items over 5 or 7 or 15 years and not 27.5 or 39 years.? And you can use any method of accounting you want.? You can use accelerated methods which give you more depreciation expense in the earlier years, enhancing your cash flow.? And then there is Bonus Depreciation, which allows you to write off substantially more than the other methods.
But you cannot do that unless you have a Cost Segregation Study done on your property.