Cost Segregation

Cost Segregation Studies Optimize Cash Flow and Deductions

Properly managing cash flows is vital to ensuring project viability within the affordable housing space. As importantly, organizations are under pressure to optimize deductions for significant capital expenditures. The regulatory tax environment on depreciation is constantly changing and unique rules apply to different assets depending on factors such as the date(s) an asset is placed-in-service. Cost segregation studies can provide a smart solution to the optimization of cash flows and depreciation deductions.

Cost Segregation is an engineering-based analysis comprised of isolating fixed assets and reclassifying them into shorter-lived tax categories. Cost segregation studies result in accelerated depreciation, tax deferral, and increased cash flow. They may be performed throughout the real estate life cycle on acquired, renovated, or newly constructed properties. While many cost segregation studies are commissioned at the time that properties are initially placed-in-service, the IRS also permits “look-back” cost segregation studies that provide a retroactive application of depreciation rules and are beneficial to the owner at the end of the tax credit lifecycle.

Tax acts, such as the TCJA, have a significant impact on low-income housing organizations. New tax regulations frequently compound the complexity of applying the depreciation deduction tax rules. Having a sound cost segregation study performed on any renovation, new construction, or acquisition brings the ability to benefit from the acceleration of tax depreciation deductions.

Constantly evolving IRS rules and recent tax acts have trended toward expanding the benefits taxpayers can reap from cost segregation studies – with 100% bonus deprecation being one such benefit. Many taxpayers may be surprised to learn about the degree to which a cost segregation study can have on tax deferral and an organization’s cash flows.

Tidwell Group has the experience, qualifications, and regulatory insight to provide the key qualities of well-designed and documented cost segregation studies that can withstand authoritative scrutiny. Our deep experience in helping clients improve their cash flows and optimize deductions has led to significant deduction opportunities for clients. Using an engineering-back methodology, Tidwell Group brings a holistic approach to cost segregation studies including:

• Uncovering unseen deductions
• Qualified property
• “Look-back” studies
• Substantial construction
• Recapture
• Section 179
• Written Binding Contracts
• Limitation on deductible interest expense
• Qualified improvement property
• MACRS documentation

Our specialized, experienced CPAs are well-versed in low-income housing property issues and can bring clarity and confidence to the significant role that cost segregation studies can play as part of a comprehensive tax strategy.