 |
 |
QUESTIONS & ANSWERS |
How
Does a Cost Segregation Study Decrease Your
Taxes? |
What is Your Return on Investment
for a Cost Segregation Study? |
Who
Should Consider a Cost Segregation Study? |
What
is Needed for a Proposal and Tax Savings
Estimate? |
|
| |
| COST SEGREGATION
SERVICES |
| |
| Whether you are constructing, purchasing or expanding
a building or relocating, KAWG&F can show you how
your new property can significantly increase your
cash flow by accelerating tax deductions. This process
can also apply to past purchases, expansions, renovations,
leasehold improvements, and step-up in basis of property
currently owned. |
| How Does a Cost
Segregation Study Decrease Your Taxes? |
| |
| A cost segregation study carefully breaks down
construction and/or acquisition costs and allocates
them to specific asset categories, maximizing depreciation
for qualifying costs. Our study allocates such costs
to personal property asset classes with lives shorter
than real property asset classes. The shorter the
depreciation period, the greater your tax deductions
and cash flow. |
| The 2002 and 2003 Tax Acts plus recently
issued
Internal
Revenue
Service Procedures include provisions making the
potential results of a cost segregation study more
beneficial than ever. |
| These new provisions include bonus first year
depreciation for certain assets (generally, those
with a useful life of less than 20 years and certain
commercial leasehold improvements). This bonus
is 30% for assets acquired after September 10,
2001
and before January 1, 2005, and 50% for assets
acquired after May 5, 2003 and before January 1,
2005. |
| Additionally, adjustments to depreciation for "missed
depreciation deductions from prior years determined
as a result of a cost segregation study" can
be reported as an automatic change in accounting
method and deducted
100% in the year of the change rather than deducted
over a four year period as previously required. |
| A KAWG&F cost segregation study is based on an
engineering approach combined with workpaper documentation
that provides the kind of detail and support generally
required by the IRS and Tax Court. |
|
| What is Your
Return on Investment for a Cost Segregation Study? |
| |
| Substantial tax and cash flow savings can be achieved
by taxpayers who properly classify their construction
or acquisition costs between real and personal property.
Every $1,000,000 reclassified from 39 years has an
after-tax present value* of: |
 |
$220,000 for 5-year property |
 |
$200,000 for 7-year property |
 |
$120,000 for 15-year property |
|
| |
| For residential rental property, every $1,000,000
reclassified from 27.5 years has an after-tax present
value* of: |
 |
$180,000 for 5-year property |
 |
$ 80,000 for 15-year property |
|
| |
| Who Should Consider
a Cost Segregation Study? |
| |
| Owners of properties such as: |
 |
Apartments |
 |
Car Dealerships |
 |
Golf Courses |
 |
Grocery Stores |
 |
Hospitals/Clinics/Medical
Offices |
 |
Hotels/Motels |
 |
Industrial Buildings |
 |
Manufacturing Plants |
 |
Office Buildings |
 |
Parking Lots |
 |
Research & Development Centers |
 |
Restaurants |
 |
Retirement Communities/Nursing Homes |
 |
Shopping Centers |
 |
Tenant Improvements |
 |
Theaters |
 |
Warehouses |
|
| *Assumes a 40% tax rate and 8% discount rate. Does
not include additional savings that could result
from the 30% or 50% bonus depreciation. |
| |
| What is Needed for a Proposal
and Tax Savings Estimate? |
| |
| New Construction: |
 |
Project Budget |
 |
Final AIA Payment Application |
 |
Indirect Costs |
 |
Construction Contact Person |
|
| Purchased Property: |
 |
Closing Statement |
 |
Depreciation Schedules |
 |
Site Survey Drawings |
 |
Facility Contact Person |
|
| Simply segregating percentages of construction
subcontracts or invoices can leave significant and
valuable benefits on the table. Additionally, this
method generally will not withstand an IRS audit. |
| You need a Maryland CPA firm with experience in
cost segregation to assist you in classifying your
property
to save
money, not only now, but in the future. We work in
close affiliation with a professional group of construction
engineers who have a thorough knowledge of the tax
code and experience in successfully defending cost
segregation studies before the IRS since 1981. |
| For more information on cost segregation studies,
or to arrange an appointment to discuss your project,
contact Jane
Brewer or Kent
Thomas at 410-828-CPAS or e-mail at jbrewer@kawgf.com or kthomas@kawgf.com. |
|