Cost Segregation Studies

If you own residential rental or commercial properties, Nelson & Company CPA can review and analyze your real estate holdings to provide you with a comprehensive cost benefit analysis that could reveal previously unused depreciation deductions that can lower your tax liability and increase your cash flow.

 
With over 20 years of Cost Segregation Study experience, Nelson & Company can identify areas of cost savings that often get overlooked.  We have performed cost segregation studies throughout the Southwest, in New Mexico, Arizona, California, Colorado and Texas.

Although the optimal time for a Cost Seg Study is during the year a building is constructed, purchased, or remodeled, a study can be completed anytime. Current Internal Revenue Service procedures make it easy to go back and claim missed depreciation on assets acquired as far back as 1987 without amending prior year tax returns.

 
While it is easy to identify furniture, fixtures, and equipment (FF&E) that are depreciated over 5 or 7 years for tax purposes, a Cost Segregation Study goes far beyond that by dissecting construction costs that are usually depreciated over 27 ½ or 39 years. 

 
The study carves out (into 5, 7, and 15-year lives) qualifying portions of your building that are normally buried in 39 or 27.5-year categories. This work to reduce tax lives results in accelerated depreciation deductions, reduced tax liability, and increased cash flow.

Benefits of Accelerated Depreciation

 
A Cost Segregation Study allows for a significant increase in deductions within the first 5 years. 

 
Assuming a combined tax rate of 41% and a return on Investment factor of 8%, every $100,000 of costs shifted from 39-year property to a 5-year property, creates a present value tax benefit of approximately $22,000. Every $100,000 of costs shifted from 39-year property to 15-year property, creates a present value tax benefit of approximately $12,000.

Who Can Benefit?

 
Any structure used for business or as rental property, is eligible for the benefits of Cost Segregation. Any leasehold improvements or renovation costs can also qualify.