To a commercial building owner, it is always important to reduce operating costs and an important strategy to achieve reductions is to implement energy efficiencies. In terms of climate/thermal controls, this can mean investment in combinations of energy efficient systems and innovative passive heating and cooling designs like well-placed windows and walls. The key is to find strategies that integrate multiple techniques for measurable results. In the case of tax services, the same can be said for creatively combining a broad range of available incentives to enhance overall benefits.
For decades Cost Segregation Studies have been used by tax advisors to reclassify the assets and building components into appropriate class lives – resulting in more accelerated depreciation schedules. The idea is to take the costs of purchasing, constructing, expanding, or remodeling commercial property and correctly identifying and classifying the asset(s). For example, the building and component systems normally depreciate over 39 years (or 27.5 for commercial residential) but may potentially be reclassified to 5, 7, or 15 years through a Cost Segregation Study.
Due to recent changes in what are called Tangible Property Repair Regulations, it is now possible to achieve even more savings by combining what are essentially cost reclassification/identification strategies associated with building component or structural replacement with the results of a Cost Segregation Study. Tangible Property Regulations have created additional tax benefits that may allow a building owner to:
- Expense costs associated with building repair and maintenance.
- Expense remaining depreciation on replaced structural components that are no longer in use like windows, HVAC systems, lighting systems, walls, plumbing, roofs, parking lots, or even landscaping. The primary criteria are that components must be considered a structural or long life asset.
- Look back at components that were retired in previous years or are still yet to be retired.
The goal of any comprehensive tax strategy is to have a firm grasp on the full spectrum of tax benefits available with a clear vision for how to aggregate and integrate into a project or within tax planning. To that end, it is of utmost importance to bring together a diverse range of design, sustainability, energy efficiency, and tax experts to work WITH commercial property owners CPA’s and tax advisors a creating solution(s) with an eye to the bottom line. For more information about Cost Segregation Studies, Tangible Property Regulations, and the combined effect of comprehensive tax strategies, contact Capital Review Group’s (CRG) team of experts. CRG is a consulting firm that combines facility engineering with tax accounting to discover tax incentives for building and commercial property owners.