Ever Considered a Cost Segregation Study?

Apr 24, 2014

Do you own your practice building? If yes, ever consider a Cost segregation study?

Cost Segregation is a strategic tax savings tool that allows companies and individuals who have constructed, purchased, expanded or remodeled any kind of real estate to increase cash flow by accelerating depreciation deductions and deferring income taxes. In general, it is easy to identify furniture, fixtures and equipment that are depreciated over 5 or 7 years for tax purposes. However, a Cost Segregation study goes way beyond that by analyzing construction costs that are usually depreciated over 27 ½ or 39 years. The main goal of a Cost Segregation study is to determine all construction-related costs that can be depreciated over 5, 7 and 15 years. For example, 20% to 50% of the total electrical costs in most buildings can qualify as personal property (depreciated over 5 or 7 years). Reducing tax lives results in accelerated depreciation deductions, reduced tax liability, and increased cash flow. Any structure used for business or as rental property can benefit from a Cost Segregation study.

There are several benefits to a Cost Segregation study. One, it generates an immediate increase in cash flow through accelerated depreciation deductions. Two, it reduces income taxes and creates an opportunity to claim “catch up” depreciation on assets previously misclassified.

The ideal time for a Cost Segregation study can vary depending on a client’s tax situation. At William Vaughan Company, our team of experts work together with clients to recommend the best tax planning solution to fit their needs.

Categories: Healthcare & Dentistry