Cost Segregation is the process of identifying and separating the elements of a building into asset classes for greater tax depreciation benefits.
This strategic tax planning tool allows you to increase cash flow and accelerate your federal and state income tax depreciation deductions on facilities you have purchased, constructed, expanded, or remodeled, including landlord or tenant improvements.
A Cost Segregation Study identifies building systems that are directly used in producing a product. DAE will identify property that can have a shorter depreciable tax life, as well as the portion of utility bills that are tax exempt. These changes reduce taxes and increase cash flow.
Accelerated Depreciation: Any mechanical, electrical, and plumbing construction costs, necessary for producing a product that are above and beyond what would be needed for a basic building, can be depreciated over a shorter period. For example, wiring, fans, starters, and other items can be depreciated over a 7-year period, rather than the customary longer period (39-1/2 years) for a typical building. Similarly, driveways, sidewalks, and landscaping can also qualify for accelerated depreciation.
Sales Tax forgiveness: Another use of a Segregation Audit involves separating out the utility costs used to produce a product versus basic building use. The benefit in doing this is that utility costs to make a product are not subject to sales tax. By separating out, considerable savings to a client can occur. Applications for this type of audit would include analyzing the cost to heat and cool ventilation air for a restaurant, and electric motors needed in a manufacturing facility.
For 30 years, DAE’s professionals have focused on helping facilities improve their efficiency by reducing energy costs and tax burden. We would welcome the opportunity to assist you with your project. DAE utilizes an engineering-based approach to cost segregation studies from the expertise of our professionals in engineering, accounting, and cost segregation.