The Secret to Increasing A Cost Segregation Study Tax-Saving Strategy

If a cost segregation study is part of your tax planning strategy, adding an energy evaluation will provide the secret ingredient you need to maximize its cost savings impact. These two strategies go hand-in-hand to reduce real estate tax liability and to keep more money in investors’ pockets.

Three Reasons

Here are three reasons why these two maneuvers go so well together.

  1. Many components of a cost segregation study are also included in an energy evaluation and can be used to accelerate depreciation. For example, the 45L tax credit or 179D tax deduction requires similar, or even duplicate, information. So, why not kill two birds with one stone and send all the documents at once?

    Keep in mind, cost segregation aims to accelerate the depreciation of everything falling outside of the 39-year property category. Energy tax incentives can be used to accelerate related energy-efficiency building components that are considered part of a 39-year property.

  2. Commissioning each is costly. Doing the study and evaluation at the same time provides cost savings because the engineers used for each collect a lot of the same information and evaluate the same building components. In addition to money, combining the effort will save you time…and time is money.

  3. Avoid leaving money on the table by doing one or the other of these tax-saving strategies alone. Even if you think your building may not be overly energy efficient, it may have been constructed with materials that still make it eligible for tax incentives.

“It’s worth it to consider both strategies because the potential benefits outweigh the marginally increased costs to conduct them,” commented MHCS’s Nick Finkenauer​, CPA. “A cost segregation study is a great way to save money on taxes, but it doesn’t have the be the only tool in your toolbox.”

Avoid leaving money on the tax table. Work with our experienced tax team to help you with your upcoming cost segregation study and/or energy evaluation.