Cost Segregation

Real Estate Cost Segregation Services
Through A&A Management’s cost segregation studies, you can accelerate income tax depreciation deductions, providing you with improved cash flow.

Valuable Tax Savings Embedded in Buildings
Your company’s real estate likely represents a large capital investment. With A&A’s engineering-based cost segregation studies, you maximize your real property’s financial return by generating significant cash flow savings. Our cost segregation professionals generate cash tax savings by carving out shorter-lived assets, qualifying for five-, seven-, or fifteen-year write-off periods that are normally embedded in a building’s construction or acquisition costs, generally depreciated over thirty-nine years.

A&A will help you uncover these buried tax savings from:

  1. New buildings presently under construction
  2. Existing building undergoing renovation, remodeling, restoration, or expansion
  3. Purchases of existing properties
  4. Office/facility leasehold improvements and "fit-outs"
  5. Post-1986 real estate construction, building acquisitions, or improvements where no cost segregation study was performed (even though the statute of limitations previously closed on the property construction/acquisition year)

Profit from the benefits of your cash flow savings! For every million dollars of property you reclassify for faster depreciation write-offs, the present value of your increased cash flow from income tax savings approximates $100,000 or more.

A Solid Case for Cost Segregation — A&A’s Engineering-Based Approach
With an A&A cost segregation study, you have evidence for material tax savings. We provide full documentation, employing engineering and cost estimating procedures recognized in IRS rulings and judicial decisions. A complete "audit trail" traces derived unit costs from contract documents and other source data. Your property is categorized into shorter-life classes based on applicable tax authorities.

During a cost segregation study, we:

  1. Physically inspect the property
  2. Examine architectural/engineering drawings and specifications for potential asset reclassification
  3. Analyze cost data, including the contractor’s application of payments, change orders, owner-incurred costs, and indirect disbursements
  4. Prepare an itemized list of property units qualifying for shorter-life classification based on relevant income tax authorities
  5. Apportion direct labor, material components, and indirect costs based on engineering drawings and specifications
  6. Reconcile total costs per the engineering analysis to capitalized project costs
  7. You get a tremendous payback for your investment in professional fees. Clients routinely receive present value cash flow savings at ten to twenty times or more their investment for the study. A cost segregation study truly maximizes the value of your real estate assets.

Enjoy the Windfall for Real Property Previously Built or Acquired
You now have a valuable opportunity, courtesy of the IRS, if you constructed or purchased real estate in a prior year but did not take advantage of a cost segregation study. This allows you to deduct prospectively over a four-year period depreciation amounts to which you were legally entitled but did not claim due to erroneous property classification as a thirty-nine-year depreciable building.

This cash flow windfall is available to you, even though the statute of limitations previously closed on the property construction or acquisition year. The A&A cost segregation team has the engineering and appraisal skills to "carve out" the overlooked shorter-life assets and file the necessary IRS paperwork to recover your tax deductions.

Light Manufacturer acquired a facility four years ago for $6 million. Based on the cost segregation analysis, A&A engineers determine that 30% of the building qualifies for short-life classification. By performing the cost segregation study and filing required accounting method change documents, A&A creates present value cash flow savings from a tax reduction approximating $310,000.

What About My Accountant?
Cost segregation is a highly specialized segment of tax law. The volume of judicial decisions, IRS rulings, regulations, and other interpretations spans thousands of pages of text. The challenge is to apply this complex knowledge to the unique facts of your industry, your company’s circumstances, and the processes of your operation. Because our team has conducted thousands of cost segregation studies throughout the United States, we bring vast practical experience to your project.

Why take unnecessary risks? A nonspecialist accountant who segregates percentages of construction costs based on invoices or other means will likely leave valuable tax benefits "on the table," and the resulting documentation may not withstand IRS examination.

We work in tandem with your CPA, whether you’re served by a large international firm, a regional firm, or a local accountant, to serve your best interests and save you money!

Why A&A?
We have developed an alliance with an engineering firm that has vast experience in performing cost segregation studies, and we are pleased to be able to provide this valuable service to our clients and other businesses in our market area.