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