Whatever your construction project may be, Mueller Prost offers a wealth of expertise, enhancing your tax savings through cost segregation. Our team can help you maximize the opportunities the tax law provides, while providing the solid tax advice you require.
When it comes to classifying construction costs, the majority of assets are often treated as real property with a 39-year depreciation life. Cost segregation identifies those assets that may be depreciated over shorter recovery periods, offering you substantial tax savings!
The result of cost segregation is more tax depreciation expense and lower taxable income.
What Is A Cost Segregation Study?
A cost segregation study is an analysis of the drawings, documents and costs relating to a building and its improvements. In any facility project, the costs of real property and personal property are combined. The difference between real property, land improvements and personal property is significant in the way these assets are treated for income tax purposes.
A cost segregation study identifies which assets qualify for depreciation over shorter recovery period, and provides you with:
- properly classified assets
- improved project cash flow
- maximized depreciation of your assets
- identification of the costs to be expensed
- detail for your fixed asset records
What Is Our Process?
Working side-by-side with licensed architects, Mueller Prost's team will:
- Physically tour your facility
- Review the architectural/engineering drawings and specifications
- Examine and analyze cost data, including work orders, change orders, and cash disbursements
- Prepare a detailed schedule of property and costs that qualify for asset life reclassification
- Apportion indirect labor, material and other indirect costs
- Compare segregated costs and allowed depreciation with capitalized costs and deducted depreciation
- Issue our cost segregation study
Now Is the Time! There has never been a better time for a cost segregation study than now. Due to recent rulings, the IRS now allows “qualified” building costs, such as wiring, plumbing, lighting or flooring to be segregated into different asset classes. By performing a cost segregation study on your facility and property, accelerated depreciation deductions may be allowed. What this means to you is tax dollar savings!
Added Bonus: The recently signed Job and Growth Tax Relief Reconciliation Act of 2003 and new revenue procedures contain provisions allowing an additional 30 or 50 percent bonus depreciation. This deduction is allowed in the year of acquisition for qualifying assets purchased after May 6, 2003, but before January 1, 2005. If you had new assets placed in service during those dates, you may qualify for the additional bonus.
Who Can Benefit From a Cost Segregation Study?
If you are constructing a new building, expanding a current facility, purchasing or renovating an old facility, you may be able to use this opportunity to generate a significant tax savings.
What If I Just Finished Building or Renovating?
It is possible to review past projects and benefit from a cost segregation. Under current IRS rules, when utilizing a cost segregation, you may deduct in the year of the change 100 percent of the depreciation you were legally entitled to, but did not claim due to the original classifications.
Are There Additional Benefits?
If potentially significant income tax savings are not enough, other benefits may include:
- Reduced sales/use tax
- Reduced property tax
- Other state and local tax credits, incentives or abatements
Why Mueller Prost?
Since 1983, Mueller Prost has been helping business owners save tax dollars through cutting-edge strategies. Aside from a team of professionals dedicated to following and implementing the latest tax laws, we have a group of individuals who focus on the real estate and construction industries. When paired with an architect, this creates the ideal team necessary for a cost segregation study. By combining our expertise in tax savings and construction accounting, the cost segregation study is a natural extension of services that Mueller Prost can offer you!
To learn more about saving tax dollars through a cost segregation study, please contact Teri Samples, CPA at 314.862.2070 or firstname.lastname@example.org.