Cost Segregation

Cost SegregationIt is often difficult to determine whether an asset is personal property or real property for federal tax purposes. Trying to determine which asset life to use just adds an additional layer of complexity to the situation. That’s why we believe it’s important to engage a firm that has both engineering expertise for ensuring individual assets are correctly classified personal or real property as well as tax expertise for determining the appropriate fixed asset schedule (asset life) for each asset.

PINNACLE’s Cost Segregation team offers you both levels of expertise. Our specialist team contains both in-house tax specialist and engineers to ensure that our cost segregation studies are complete and well documented while maintaining an outstanding record for satisfying IRS requirements and maximizing your tax benefits.

Cost Segregation Overview

Cost Segregation is the process of identifying personal property and other, short-lived assets that are grouped with real property assets, then separating them out for tax reporting purposes to maximize your tax deductions.

  • Opportunity to reduce federal income taxes by accelerated depreciation methods.
  • Process of identifying personal property and other short-lived assets from the cost of new construction or acquired properties.
  • Buildings and leasehold improvements are normally depreciated over 39 years for federal tax purposes.
  • A cost segregation analysis typically reclassifies 20 percent to 40 percent of a building’s value to personal property with a 5, 7 or 15 year depreciation life.
  • Reducing tax “lives” enables you to accelerate depreciation deductions, reduce your tax liability, and improve cash flow.
  • A taxpayer can realize the savings for older buildings without having to amend any tax returns.