Tax Reduction and Cost Segregation - Myths and Facts

Tax tips to help cut through legitimate tax deductions and tax cuts to assist taxpayers by describing options.

Tax deductions and tax deferral are both generated by cost segregation. However, the device well, most real estate investors and many tax preparers are not understood. Understand the root cause of limited tax deductions cost segregation and how it provides factual data about the spread of this topic is limited.

The most prevalent myths include:

* Tax deductions cost segregation, tax deferral is not provided.
* Cost segregation is too expensive. It's only $ 10 to $ 20 million or more with the cost basis for property works.
* Cost segregation is risky, it is likely to cause an audit of a tax shelter.


All three myths are simply wrong.

Cost segregation capital gains rate (15% maximum) on the income tax imposed on income that would be ordinary income rate (35% maximum) by converting the tax deduction offers. Ownership during the period cost segregation generates additional depreciation real estate investors use to shelter income from property or other sources can. In many cases this income at 35% has been levied.

On sale, the property owner and tax preparer will collectively allocate the selling price. In most cases, carpets, vinyl floor tiles and worn as a short life and property and the market value of these assets sales (the time) equals their depreciated cost basis. In the event additional depreciation is taxed at capital gains rates. Therefore, real estate investor gains both tax reduction and tax deferral.

Separation costs $ 20,000 to $ 50,000 cost per property was used and the economic cost at least $ 10 million for the property with the base possible. However, fees for cost segregation studies are now very low. It usually makes sense to order a cost segregation study based on the cost of the improvement is less than $ 500,000. In most cases, the tax deduction the first year of study of at least two to four times the fee.

Cost segregation studies being a risky scheme of myth is totally false. A well-prepared cost segregation study is encouraged by the IRS since it generates more accurate accounting. Audit Technique Guide over 100 pages and a cost segregation report is the proper procedure manual background.

Both consultants and appraisers (who perform cost segregation studies) have studied and understand the Audit Techniques Guide. Cost segregation studies are encouraged by the IRS. In private correspondence, IRS staff does a cost segregation study does not increase the transformation of an audit has been indicated.

If you are a real estate investor or use real estate in your business, ignore the myths and receive a free initial analysis to determine if you benefit from a cost segregation study could increase your tax deductions and tax cuts.

Cost segregation produces tax deductions and all size markets across the country and reduces federal income taxes. Just below where cost segregation generates meaningful tax deductions are a few examples.

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