Most people think of utilizing cost segregation when it comes time to settle up their taxes owed at the end of the year. Because of that, we are very busy as you can imagine leading up to March 15th for corporate returns, April 15th for personal returns and then with extensions it’s September 15th and October 15th, respectively. But did you know that you could use a cost segregation study…even an estimate to help offset your taxes owed for your quarterlies?
The September 15th quarterlies are due next week and many business and building owners will be writing checks to the IRS. At the same time most of these owners are likely sitting on untapped depreciation that they could use to offset this tax obligation. How so? At this point there isn’t time to get an engineering-based cost segregation study completed. Those tax a solid six weeks. However, an owner could reach out to me and get an estimate for his/her building to see what kind of tax savings might be available should he go forward with a cost segregation study.
Let’s say you own a million dollar commercial building and you’ve had it for a couple of years. Or maybe you own a rental home, a duplex, a small apartment…it doesn’t matter really. If you own an income producing residential investment or commercial property may be able to apply this strategy as well. Please run this past your own personal tax advisor.
Let’s take that $1 million commercial building that you’ve owned for 3 years. You’ve taken a small amount of depreciation straight line. But if you were to segregate out the 5 year and 15 year class life property, you might be able to take 15-20% of the building’s basis this year and lower your tax bill. On a building like that it mean a tax savings of $50-$75,000. Let’s say you owe $15,000 for your September 15th quarterly tax payment but you have a cost segregation estimate from us showing that if you do a study, we’ll save you $50,000 on your income taxes. Well you know have that as your documentation, should it ever be needed, that you don’t owe any quarterly taxes September 15th. Oh, and the study would cost you a lot less than that $15,000 tax bill BTW.
As we anything I publish, this is not tax advise but merely a strategy some building owners use to help offset their tax liability. Please consult with your own tax advisor on any and all tax decisions including possibly utilizing a cost segregation study.