| Real estate depreciation offers substantial | | | | Cost segregation produces tax deductions and |
| opportunity for increasing tax deductions. Most | | | | reduces federal income taxes across the country and |
| depreciation schedules are established by simply | | | | in every size market. Below are just a few examples |
| separating land and long-life improvements. This | | | | of cities where cost segregation generates |
| simple approach is lawful but sharply understates | | | | meaningful tax deductions. |
| lawful depreciation. About 20-40% of improvements | | | | City: |
| for most properties are short-life items. Short life | | | | - New York, NY |
| items can be depreciated over 5, 7, or 15 years. | | | | - Houston, TX |
| There are about 130 short-life items that have been | | | | - Hartford, CT |
| determined by legislation, tax court decisions and IRS | | | | - Las Vegas, NV |
| rulings. | | | | - Memphis, TN |
| Real estate depreciation can typically be increased by | | | | - Philadelphia, PA |
| 50-100% for the first 5-7 years of ownership by | | | | - Orlando, FL |
| obtaining a cost segregation study. A cost | | | | - Phoenix, AZ |
| segregation study precisely values up to 130 | | | | - Atlanta, GA |
| components of real estate that can be valued as | | | | - Bridgeport, CT |
| short-life property. | | | | - Worcester, MA |
| By obtaining a cost segregation study, it is possible to | | | | - Akron, OH |
| obtain a windfall of tax deductions by "catching-up" | | | | - Harrisburg, PA |
| previously under-reported depreciation. This one-time | | | | - Salt Lake City, UT |
| "catch-up" can occur in the first tax return filed after | | | | - St. Louis, MO |
| the cost segregation study is performed without filing | | | | - Portland, OR |
| any amended tax returns. | | | | - Scranton, PA |
| Reviewing fixed asset listings (of business personal | | | | - Greenville, SC |
| property) can generate a meaningful amount of tax | | | | - Bakersfield, CA |
| deductions. They often include items that should | | | | - Madison, WI |
| have been expensed, which have been sold or | | | | - Chicago, IL |
| thrown away or which have an excessive | | | | - Fresno, CA |
| depreciation life. Items that should have been | | | | - Riverside, CA |
| expensed include operating expenses (sometimes | | | | - Albany, NY |
| included by error) and maintenance or repairs (which | | | | - Indianapolis, IN |
| was necessary but did not increase the life of the | | | | - Birmingham, AL |
| assets or component.) Section 179 allows business to | | | | - Ft. Lauderdale, FL |
| use up to $108,000 of 2006 capital expenditures as | | | | - Baton Rouge, LA |
| tax deductions. Confirm you are not capitalizing | | | | - Augusta, GA |
| assets that could be claimed as a tax deduction. | | | | - Honolulu, HI Cost segregation produces tax |
| Casualty losses also offer opportunity for tax | | | | deductions for virtually all property types, including |
| deductions. For a casualty loss, you can deduct: 1) | | | | the following: |
| the market value immediately before the casualty | | | | Property Type: |
| less 2) the market value immediately after the | | | | - Medical facility |
| casualty less the amount covered by insurance. The | | | | - Shopping mall |
| portion that is not intuitive is: the market value after | | | | - Restaurant |
| the casualty is much less than the value before plus | | | | - Country club |
| the cost to renovate. Other factors which can and | | | | - Fast food restaurant |
| should be considered for tax deductions are: lost rent | | | | - Power center |
| usage, stigma (in some cases), construction | | | | - Hotel |
| management, construction risks, and entrepreneurial | | | | - Car wash facility |
| effort. | | | | - Convenience store |
| Bad debts are a subjective matter. Judgment is | | | | - Health spa Almost every industry, including the |
| required to accurately estimate the amount that | | | | following, can generate cost-efficient tax deductions |
| should be claimed as a tax deduction. If bad debts | | | | by using cost segregation. |
| have not been examined carefully for several years, | | | | Industry: |
| they may offer a meaningful tax deduction | | | | - Golf courses and country clubs |
| opportunity. (This applies to companies who utilize | | | | - Transportation equipment manufacturing |
| accrual accounting. Companies who use cash | | | | - Electrical component manufacturing |
| accounting can't claim a tax deduction for bad debt | | | | - Real estate lesser |
| since they never recognized the revenue.) | | | | - Apparel manufacturing |
| Do well by doing good. You reduce taxes in several | | | | - Wood product manufacturing |
| ways when making charitable contributions. For | | | | - Plastic and rubber products manufacturing |
| example, you purchased land 10 years ago for | | | | - Furniture stores |
| $200,000, and it is now worth $1,000,000. However, | | | | - Beverage and tobacco product manufacturing |
| you now realize you will never use the land for the | | | | - Building supply dealers |
| intended purpose. You can donate the land to a | | | | Tax reduction services include federal income taxes, |
| qualified charitable organization and take a tax | | | | state income taxes and property taxes. We do not |
| deduction for $1,000,000. However, you do not have | | | | prepare income tax returns. Instead, our advisors |
| to pay capital gains taxes on the appreciation. | | | | review your circumstances and suggest cost |
| Tax deductions sometimes seem arcane and | | | | effective options to lawfully reduce your income tax |
| complicated. However, a knowledgeable team of | | | | liability. 5. O'Connor & Associates is a national |
| advisors from several fields can reduce your federal | | | | provider of commercial real estate consulting services |
| income taxes. The complexity of the tax code | | | | including cost segregation studies, tax reduction, |
| makes it difficult for any one personal to be | | | | feasibility studies, tax return review, apartment |
| knowledgeable in all areas. | | | | inspections . |