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Engineering-based Cost Analysis

What Is Cost Segregation?

COST SEGREGATION DEFINED

Cost Segregation is an engineering-based cost analysis of new or existing projects to accelerate depreciation expense for federal income tax purposes.

The existing building(s) on your balance sheet – or the property you just acquired or renovated – may generate more cash flow benefits than most companies realize. That’s because short-lived assets buried in construction or acquisition costs are often hidden, failing to save you as much as they should in income taxes. Enhancing your bottom-line profitability with “cost segregation” studies can be a potent tool, bringing to light substantial tax savings made possible by accelerated depreciation of these hidden assets.

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QUALIFICATIONS

The following questions can help you determine whether you could benefit from a DASI cost segregation study.

  • Do you own commercial property or leasehold improvements constructed or purchased since January 1, 1994?
  • Are you paying federal income taxes?
  • Have you paid income taxes in the past five years that you would like to have refunded?
  • Would you like to reduce your income tax liability significantly over the next 5 to 10 years?
  • Would you like to improve your cash flow by accelerating tax depreciation deductions, which are entirely allowable under current tax laws?

Although any non-residential commercial property may qualify for substantial tax deferral and cash flow benefit, the following list is a representative sampling of property types with a high probability of significant cash flow benefit.

  • Restaurants
  • Hospitals
  • Hotels
  • Dealerships
  • Manufacturing Facilities
  • Office & Industrial Buildings
  • Medical Office Buildings
  • Capitalized Leaseholds
  • Retail/ Facilities
  • Airport Hangers
  • Grocery Stores
  • Multi-family Properties

EXAMPLES

DASI can help you achieve Substantial Tax Savings Benefits if you have done one of the following:

  • Purchased a commercial building or facility.
  • Constructed a new commercial building or facility.
  • Renovated, remodeled, restored or expanded an existing building or facility.
  • Paid for office or facility leasehold improvements.
  • Owned a commercial facility that was purchased or improved after January 1, 1994.

Why Cost Segregation?

ARE YOU PAYING TOO MUCH TAX?

Thousands of commercial property owners overpay federal income tax every year because they are missing out on allowable depreciation expense deductions. Ironically, these accelerated depreciation expense deductions are readily available to all federal taxpayers under existing IRS tax laws. However, without an engineering-based cost segregation analysis, the taxpayer is unable to take full advantage of the tax law, thus preceding the significant cash flow remitted to the IRS each year.

Depreciation continues to be one of the most significant opportunities to reduce your federal tax burden. Without cost segregation or purchase price allocation, however, many companies fail to capture these benefits fully. A cost segregation analysis breaks down construction and acquisition costs and allocates them to specific categories like tangible personal property, land improvements and real property.

In the absence of a cost segregation study, for example, it is difficult for a company to separate all of the personal property and land improvement costs, as well as indirect costs, from the total cost of the building. The result – all such properties are subject to 39-year straight-line depreciation (27.5 years for residential property) and a substantially higher tax bill.

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WHY DASI?

Acceleration of depreciation expense is easily achieved by engaging DASI Cost Segregation Group (DASI) to perform an engineering-based cost segregation study that identifies and “breaks out” personal property components and land improvements from the structural building costs.

Your income tax savings depend on the quality and supportability of the cost segregation study. At DASI, our sophisticated engineering approach and rigorous documentation procedures strongly support results. Conclusions are based on a thorough review of construction drawings and cost documents along with the careful on-site inspection. Extensive experience with the Internal Revenue Service in this area, combined with comprehensive research of the latest tax rulings, gives us the insight you need to support the most beneficial allocations.

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Dasi Cost Segregation Group

Questions?

If you have questions relative to your unique circumstances, please contact us. We would be glad to answer your questions and better explain the tremendous cash flow opportunities.

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