Tax Reduction

Tax Reduction - a Result of Cost Segregation- Bridgeport, CT
Tax tips and tax help to assist taxpayers by- Washington, DC
describing optionsfor tax reduction and tax cuts- San Francisco, CA
through lawful tax deductions. Tax reduction and tax- Atlanta, GA
deferral are the primary benefits of obtaining a cost- Dallas/Ft. Worth, TX
segregation study. Income taxes are a substantial- New Orleans, LA
burden for most real estate investors. Tax- New York, NY
deductions help with this burden. While some level of- Baltimore, MD
taxation is necessary, it is both inappropriate and- Hartford, CT
imprudent to pay more than your fair share. Income- Indianapolis, IN
tax is based on net profit or taxable income. The- Wichita, KS
basic formula for calculating taxable income is- Detroit, MI
revenue less expenses (tax deductions). Expenses- Charleston, SC
can include both direct payments to third parties- Providence, RI
(labor, rent, supplies, etc.) and non-cash deduction.- Grand Rapids, MI
The primary non-cash deductions are depreciation- Jacksonville, TN
and amortization. Tax reduction (tax cuts) are a- Boise, ID
direct result of increasing tax deductions. The tax- Santa Rosa, CA
deduction benefit real estate owners gain from cost- Columbia, SC
segregation is a higher level of depreciation. This- Columbus, OH
non-cash tax deduction reduces taxable income and- Oxnard, CA
income taxes. For example, if the amount of- Greensboro, NC
depreciation increased by $100,000 (as result of a- Allentown, PA
cost segregation study), taxable income would- Harrisburg, PA
decrease by $100,000, and the owner experiences a- Louisville, KY
$35,000 reduction in taxes (based on 35% tax rate).- Fresno, CA
Most real estate owners depreciate real estate- Akron, OH
based upon splitting the cost basis between land and- Chicago, IL
improvements. The property owner or tax preparer- Portland, OR Cost segregation produces tax
typically estimates the portion for the land anddeductions for virtually all property types. Property
attributes the balance to long-life improvements.Type:
Long-life improvements depreciate over 27.5 years- Manufacturing/processing
for rental residential property and 39 years for- Tennis club
commercial property While this simplistic method is- Retirement home
lawful, it cheats the real estate owner of tax- Auto service garage
deductions. A cost segregation study identifies up to- Mini-warehouse
130 short-life components. (Cost segregation is- Single-tenant retail
different than component depreciation, which was- Medical facility
available until the early 1908s. However, the result of- Hotel
both is to increase depreciation and tax deductions- Retail
during the early years of ownership.) These short-life- Vacant land Almost every industry, including the
components typically comprise 20-50% of thefollowing, can generate cost-efficient tax deductions
improvement cost basis and are depreciated over 5by using cost segregation. Industry:
years (20.0% per year), 7 years (14.29% per year)- Wood product manufacturing
and 15 years (6.67% per year). Depreciation- Warehousing and storage
effectively changes the character of income from- Truck transportation
ordinary income to capital gains income. While the- Transportation equipment manufacturing
maximum income tax rate for ordinary income is- Textile product mills
35%, the maximum rate for capital gains is 15% (less- Textile mills
than half the ordinary income tax). This affects- Real estate lesser
substantial income tax reduction. Increasing- Publishers
depreciation also affects deferral of payment of- Printing activities
income taxes. Instead of paying taxes (at the- Plastic and rubber products manufacturing O'Connor
ordinary income tax rate) in the year income is& Associates is a national provider of commercial
earned, taxes are paid (at the capital gain rate) in theproperty real estate consulting services including cost
year the property is sold. Cost segregationsegregation studies, due diligence, insurance
effectively generates an interest free loan (until thevaluations, abandonment studies, business personal
property is sold) and reduces the tax rate (fromproperty valuations, commercial appraisals, feasibility
35% to 15%). Click here for a FREE preliminarystudies, highest and best use analyses, and income
analysis of tax savings resulting from your property.tax.
Cost segregation produces tax deductions andOur services benefit owners of all commercial
reduces federal income taxes across the country andproperty types including multi-family housing, retail
in every size market. Below are just a few examplesstores, hospitals, hotels, industrial properties,
of where cost segregation generates meaningful taxmanufacturing facilities, medical offices, commercial
deductions. City:offices, restaurants, self-storage units, shopping malls,
- Miami, FLshopping plazas and warehouse/distribution centers.