Basel Labs

Identifying your property assests which are bound together with real property assets and segregating this personal assests to be used for tax purposes is called the process of Cost Segregation. Cost segregation is under the tax laws and rules of accounting in the United States of America. In a cost segregation study, it recognizes and reclassifies your own property assests or personal assets such that it will decrease the the time of depreciation for the purposes of taxation. In turn, it decreases your current obligations on income tax. The non-structural elements of a building, land improvements and indirect construction costs are included in the list of your personal property assets.

Cost segregation is also defined as an egineering-based process. It is through the identification and accounting the parts of a commercial real state. This is done to evaluate which of the components can have shorter depreciable lives as a qualification. If the component has a shorter qualification life, the depreciation deductions accelerates. This means that you will be able to save on taxes through tax deferrals and increase your savings.

Those that are qualified for cost segregation are the buildings which have been constructed, made, renovated or expanded since the year 1987. Buildings that were bought or renovated from a cost of $500,000 or more is cost-effective for a study. It is more adept for newly constructed buildings or still under construction and also it can uncover older buildings for retroactive tax deductions. The building types can be apartment complexes, dealerships on automobiles, distribution centers, fast foods, food processing plants, hotels or motels, retail chains and franchises, shoppong arcades or malls, stadiums, amusement parks, supermarkets, casinos, manufacturing plants, medical centers and nursing homes, office buildings, and gas stations.

When we are speaking about a study in cost segregation, we are talking about the allocation or reallocation of the overall cost of the property into the proper class such that we are able to compute how much deductions we can get. Then it is summarized in an accompanying report. This type of studies are done for income tax purposes.

The method used in the total project cost allocation is very important in gaining an effficient study. More often, either an engineer or an accountant will do the role of analyzing the blueprints of a building which are the architectural drawings, and mechanical and electrical blueprints. It also includes soft costs like the fees of the architect and engineers and all the parts of the building.

In the state of Florida, the city of Miami offers cost segregation services through companies such as POER which is located in Deerfeld Beach, Babcock-Ernst in South Dadeland Boulevard, Cost Recovery Solutions, LLC in Fort Lauderdale, and Shutts & Bowen located in South Biscayne Boulevard.