The new building on your balance sheet – or the property you just acquired or renovated – may generate more cash flow benefits than most companies realize. Depreciation continues to be one of the most significant opportunities to reduce your federal income tax liability. However without cost segregation, many companies fail to fully capture these benefits.
Maximize depreciation when:
- Building a new facility
- Renovating, remodeling or expanding an existing building
- Purchasing or acquiring real estate
- Relocating and investing in leasehold improvements
- Not depreciating current assets properly
- Cost allocation mixed-use and condo
- Fixed asset reviews
- Partial dispositions
- Repairs vs capital improvements
- Tax sensitive design
- Insurance valuation
- Expert testimony
Cost segregation studies, by identifying and classifying the cost basis of personal and real property, uncover the benefits among those assets by bringing to light substantial tax savings made possible by accelerated depreciation
Mazars’ team of qualified professionals have over 35 years of experience completing cost segregation studies. We can help you achieve tax saving through our studies, which adhere to the IRS’ Cost Segregation Audit Techniques Guidelines. We are uniquely positioned to assist in this area because our practice was asked by the IRS to review these guidelines during their development. And, as leaders in international consulting, we are involved in worldwide policy-setting organizations focused on the future trends that will impact you most in upcoming years.
Qualified Improvement Property (QIP)
- Qualified Improvement Property (QIP) is any improvement to an interior portion of a building which is non-residential real property, if the improvement is placed in service after the date the building was first placed in service. It is depreciated over 39 years the same as non-residential real property using GDS lives. Our team has done many of these studies and we are skilled at breaking out QIP from Real Property.
- The Tax Cuts and Jobs Act of 2017 (TCJA) changed bonus depreciation, making a cost segregation study extremely valuable. The most dramatic of these changes being doubling of the bonus rate from 50% to 100% for property placed in service after September 27, 2017 through December 31, 2022. Taxpayers are also now able to take advantage of the accelerated depreciation for acquired property as well as newly constructed property. Our team can help you understand the changes and complexities of Bonus Depreciation under the TCJA and optimize your tax stance.
A bonus depreciation success story
We recently completed a cost segregation study for a client who had acquired a suburban office park for $32,000,000 on October 15, 2018. Through the study 6% of the purchase cost was reclassified to 5-year property; 1.5% to 7-year property; and 10.5% to 15-year property, with the balance of the $32 million depreciated over 39 years. The depreciation benefit would be $91,000,454. However, because the property is eligible for bonus depreciation, the client was able to recognize an additional $5.12million.
If the client had not completed a cost segregation study, they would have only recognized $445,120 in depreciation expense.
Scroll down to download the bonus depreciation success story infographic.