California CPA for Cost Segregation for Businesses
Contact the California accountants for cost segregation for businesses at Cook CPA Group for help allocating or reallocating business costs and assets.
Cost segregation is the process by which a business distinguishes between personal property assets and real property assets in order to separate out personal assets for tax reporting purposes. Using the help of an experienced CPA to perform a cost segregation study can benefit businesses by providing insight and analysis into the best way to classify assets, which can maximize tax savings and reduce tax liabilities.
Businesses can have this important study done with the help of an experienced cost segregation accountant. The California cost segregation study accountants from Cook CPA Group can help businesses increase their overall cash flow by advising them on cost segregation studies.
Understanding Cost Segregation Studies for Businesses in California
During cost segregation studies, personal assets that are grouped along with real property assets are identified for the purpose of tax reporting. Cost segregation studies analyze the costs that are associated with a building so that the portion of the cost that is considered to be personal property or land improvement can be isolated—these costs depreciate over a shorter amount of time and can have an impact on the amount of taxes that a business will have to pay. This study can be performed by companies that have constructed, purchased, expanded, or remodeled their real estate and would like to accelerate the deduction of depreciation and defer taxes.
A cost segregation study is applicable to a few different types of buildings. Cost segregation studies can be done on the construction of a new building, the renovation or expansion of a facility, or the purchase of a building. Cost segregations can also be done on buildings that are already owned. Almost any type of building (including airports, apartment buildings, parking structures, restaurants, office buildings, and retail spaces), acquisition, construction, or improvement placed into service after 1986 can have a cost segregation study performed on it.
Benefits of Cost Segregation Studies
There are both short-term and long-term benefits to cost segregation studies. The benefits of having a cost segregation study done on your property include:
- Timing – Cost segregation studies mean that you get to accelerate the speed of depreciation, which means that you’ll have to pay fewer taxes and therefore can retain more of your income. Costs can also be assigned to classifications with shorter depreciable lives, which can result in even more tax savings. Cost segregation can also result in the identification of tax credits, incentives, and abatements.
- Revealing potential opportunities for saving – During a cost segregation study, you might identify opportunities for past property acquisitions or opportune chances for construction activity. A cost segregation study can identify depreciation amounts that were not previously claimed, which can be deducted from taxes.
- An opportunity for a “catch-up” – Cost segregation studies are a chance to reclaim depreciation deductions that have been overlooked during previous tax years. Adjustments can be made in one filing instead of over multiple years.
- Creating an audit trail – When a cost segregation is done, cost and asset classifications are properly documented. This can prevent audits by resolving IRS inquiries at very early stages.
- Create the opportunity for future write-offs – When structural components in a building are replaced, property owners have the opportunity to deduct it in the future.
- The savings of a cost segregation study is much greater than the cost – Although there are some costs involved in a cost segregation study, the savings that can be made in both the short and long term greatly outweigh them. Other downsides of cost segregation studies include the potential to trigger a depreciation recapture and an understatement of penalties for taxpayers that cost segregate too aggressively; however, the benefits and opportunities for savings are still more substantial.
How a California CPA Can Assist You with a Cost Segregation Study
Working with an experienced CPA is the best way to get the most from your cost segregation study. If you are unsure of whether your business could benefit from a cost segregation study, use the help of a CPA to advise you on the best way to optimize your business’s asset classifications. While performing a cost segregation study, a CPA can not only reconcile costs with specific assets so that you can save costs, they can also conduct additional research and identify useful elements of your asset profile. Businesses that are having a cost segregation study done should expect the study to take between two and four weeks to be completed. Cost segregation studies should be done as soon as new property is accumulated or modified.
Cost segregation studies have always been used as a way to save costs. Following the Tax Cuts and Jobs Act, they have only become more beneficial and conducive to saving. This tax reform act made changes to bonus depreciation that made cost segregation studies even more valuable to businesses. Since these reforms have been passed, used property has been eligible for bonus treatment; previously, only new properties were eligible.
Cost Segregation Accountants Available in California
Cost segregations studies are an easy way for businesses to increase their overall revenue by lowering their tax liability through the proper classification of their assets. Use the services of the California cost segregation study accountants from Cook CPA Group to have a cost segregation study performed on your business.