What if
What if a cost-segregation study could properly reclassify $1,000,000 from 39 year to 5 year property and $1,500,000 to 15 year property to result in approximately a $550,000 first year tax benefit deduction? Add a zero and that's $5,500,000 increase in cash flow. What if for every $100,000 increase in cash flow the building value goes up some $1,000,000 (10% Cap Rate) or $2,000,000 (5% Cap Rate). Is that something the owner would want to know? What if the owner could reclassify 10-40% (or more) of the depreciation base of that building? What if the HVAC units, plumbing and electrical systems, wall coverings, lighting or removable partitions could save the owner millions? Contractors need to embrace this betterment and inform the owners of the new opportunities in TaxFavored Construction.
Application of Cost Segregation
Cost segregation can be applied to new or existing construction, tenant improvements, build-outs, renovation, remodeling, restoration, expansion, fit-outs, and demolition. That's right, even demolition can now be structured to save taxes. Maybe it's time to consider requiring your architects, brokers, CM and contractors to propose to you a Cost Segregation option - prior to final plans and design. Although you can implement a cost segregation study to realize great savings during or after construction, new construction integrated with tax-favored constructionâ„¢ techniques can yield maximum cash flow savings and valuation enhancements. Maybe it's time to have a third party consultant prepare you a free cost segregation study based on your proposed blue prints. You can find cost segregation consultants (engineer based CPAs and tax attorneys) at www.taxfavoredconstruction.com .
