Unlock Immediate Tax Savings with Cost Segregation
·2 min 21 sec
How does cost segregation create immediate tax savings?
A cost segregation study reclassifies parts of a commercial property out of the standard 39-year schedule and into 5, 7 and 15-year lives, which pulls deductions forward into the early years of ownership instead of spreading them evenly across decades. The result is a larger deduction now and more cash retained in the business today.
What if you could transform a portion of your building’s price tag into a first-year tax deduction? In this video, Carlos from US Tax Advisors Group breaks down cost segregation with an example. Imagine purchasing a $1.2 million commercial building. By separating the non-depreciable land and applying a strategic cost segregation study, you could accelerate depreciation on a significant portion of the property.
The Result? Substantial upfront tax savings that can offset your gross taxable income, improving cash flow and boosting your investment's return from day one.
“For active real estate investors, a cost segregation study creates immediate, powerful losses to shelter your income. In essence, that’s how it all works.”
Carlos, US Tax Advisors Group
Ready to See What Your Property Can Do For You?
Cost segregation is a detail-oriented strategy that requires expert analysis. Our team specializes in maximizing deductions for investors like you.
Full transcript
(click to expand)
0:02Hey everyone, this is Carlos with US Tax Advisors Group and here's a very simple example on how cost variation works. So let's say that you buy a building, let's say that it's a commercial building and you buy it for $1.2 million. The very first thing that we have to do is take the land allocation into account. Land is a non-depreciable asset, therefore we got to remove it out of of the equation. So let's say that for example purposes, land is the land for this property is worth $200,000, which means that out of the $1.2 million building basis, we minus the land part of it because again, it's not depreciable. So $1.2 million minus $200,000 that leaves you with a $1 million building basis. And typically on a commercial building on a very standard, like an office building, something like that, you will see that the carve out between the shorter lives, between the five and the 15 year property comes down to about 25%.
1:10So what that means is out of that $1 million pizza pie, you get to carve out about 25%. So about $250,000 to the shorter lives. And because of 100% bonus appreciation, you get to grab all of that in year one. That $250,000 or that 25% typically breaks down with 17% being five-year property and about 8% being your 15-year property. So in other words, you can see that the five-year category is the heaviest bucket. It represents $170,000 as opposed to the 15-year category which it only represents about $80,000.
1:50But the two combined give you about $250,000 and that is how cost segregation works. So if you're an active real estate investor, what this typically does is that you're able to use the $250,000 in loss is that the cost segregation studies giving you upfront to offset your gross taxable income. In essence, in a nutshell, there's, you know, we are a very devils in the details type of industry, but in essence, that's how it all works.
2:17See you guys next time.
