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Cost Segregation: Still a Viable Tax Solution to Defer Taxes

The current Internal Revenue Code is still under heavy scrutiny and it appears will by significantly changed somewhere in the future.

Despite the uncertainty, construction of new buildings, renovations to existing buildings and the building of tenant leasehold improvements continue in all industries. This is particularly true in the retail automotive industry. Many dealerships are renovating and modernizing their places of business. With these renovations come great opportunities to create tax savings through a cost segregation study. A cost segregation study combines the use of engineers and CPA’s to identify those cost in construction that can be moved from longer lives (39 years) to shorter lives of 5, 7 or 15 years for federal tax depreciation purposes.

The retail automotive industry is a very high asset concentrated industry. The showrooms, service areas and even offices are extremely asset intensive and many of the costs that can be capitalized as part of the building are truly items that can be moved to shorter lives.

If your company has undergone or is in the process of going through either new construction, renovation or expansion of an existing building, an acquisition of a property or the construction of tenant leasehold improvements, you should look into the benefits of doing a cost segregation study. Withum has a full Cost Segregation group. We offer a complimentary feasibility analysis to help determine the tax-savings benefits that might be available through doing a cost segregation study.

Please call us to discuss this potentially viable opportunity.

To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.

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Cost Segregation

Cost segregation is a method that creates revenue in the form of reducing current taxes for real estate owners and developers. The process allocates the entire costs of a building or other property into components that cause an acceleration of tax deductions with a resulting deferral of federal and state taxes. While the study’s purpose is to reduce current taxes they are usually prepared by engineers.

Apr 24, 2019

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