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Cost Segregation is a tax strategy that accelerates depreciation deductions by identifying and reclassifying portions of real property to shorter depreciation periods, typically 5, 7, or 15 years. A cost segregation “study” is a report that reverse engineers a building on paper assigning a portion of the purchase or construction cost to each component. Once this process is complete, the study concludes by summing the components that are allowed to be depreciated more rapidly.
Property owners who have constructed, purchased, or renovated any type of real estate can benefit. This includes residential rentals! To maximize the savings from cost segregation you should plan to hold the property in your portfolio for at least a few years.
We conduct a fully-detailed engineering study to identify and reclassify assets. These assets are then assigned to shorter depreciation lives, allowing for accelerated depreciation deductions.
Almost any property used for business purposes can benefit, including apartment buildings, offices, shopping centers, manufacturing facilities, self-storage, residential rentals, STR properties and more.
Yes, Cost Segregation can be applied retroactively by filing a Form 3115, Change in Accounting Method, with the IRS. Our studies include this form, completed in its entirety, at no additional fee.
Section 179D is a tax deduction for energy-efficient commercial buildings, allowing owners or designers of such buildings to claim a deduction for installing energy-efficient systems.
Owners of commercial buildings and certain residential buildings over four stories are eligible. Designers (architects, engineers, contractors) of energy-efficient systems of government-owned or non-profit owned buildings can also claim the deduction.
The maximum deduction is $5.72 per square foot of the building, depending on the level of energy efficiency achieved and if the building paid prevailing wages to all of the contractors and subcontractors during construction.
Improvements to lighting systems, HVAC (heating, ventilation, and air conditioning) systems, and the building envelope (insulation, windows, etc.) can qualify.
The building must achieve a certain level of energy efficiency compared to a reference building defined by ASHRAE (American Society of Heating, Refrigerating and Air-Conditioning Engineers) standards. A certified third-party professional must conduct an energy analysis and provide certification.
Section 45L is a federal tax credit for energy-efficient residential buildings, providing incentives for builders and developers to construct energy-efficient homes and dwelling units.
Eligible taxpayers include builders, developers, and contractors who construct or significantly renovate energy-efficient residential properties, including single-family homes, multi-family buildings, and certain residential rental properties.
The credit is between $500 and $5,000 per dwelling unit for homes that meet specific energy efficiency standards and/or pay prevailing wages and meet apprenticeship program requirements.
The property must be certified to achieve at least 50% energy savings for heating and cooling over a comparable dwelling unit constructed in accordance with the applicable International Energy Conservation Code (IECC). At least one-fifth of the energy savings must come from building envelope improvements.
A certified third-party professional, such as a RESNET (Residential Energy Services Network) rater, must conduct an energy analysis and provide certification that the property meets the required standards.
The R&D Tax Credit is a federal incentive designed to encourage businesses to invest in research and development activities by providing a tax credit for qualified expenses to help offset the cost of moving science forward.
Businesses of all sizes and across various industries that engage in qualifying R&D activities can be eligible, including manufacturing, software development, pharmaceuticals, and more.
Activities that qualify include those intended to develop or improve products, processes, techniques, formulas, inventions, or software. These activities must involve a process of experimentation and meet the IRS's four-part test.
- Permitted Purpose: The activity aims to create or improve a product or process.
- Elimination of Uncertainty: The activity aims to resolve technical uncertainty.
- Process of Experimentation: The activity involves a systematic process of experimentation and evaluation of alternatives.
- Technological in Nature: The activity relies on principles of physical or biological sciences, engineering, or computer science.
Qualified expenses include wages for employees involved in R&D, costs of supplies used in R&D, costs of contract research, and certain costs associated with the use of computer systems.
Schedule a free consultation with a specialty tax expert. We’ll discuss your eligibility, your potential estimate of benefits and answer any questions you have.
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