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What is Cost Segregation?

 

COST SEGREGATION IS AN IRS APPROVED TAX PLANNING STRATEGY THAT ALLOWS COMMERCIAL REAL ESTATE OWNERS AND RESIDENTIAL REAL ESTATE RENTAL OWNERS TO ACCELERATE DEPRECIATION DEDUCTIONS, SIGNIFICANTLY IMPROVE CASH FLOW, AND DEFER TAXES.

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How?

The primary objective of a cost segregation study is to identify all property-related costs that can be depreciated over 5, 7 and 15 years.

How do we identify these costs you might ask?
When you purchase a property, it includes not only the building structure, but all of its interior and exterior components. These interior and exterior components are the components ELB will zero-in-on for a cost segregation study.

Approximately 20% to 45% of these interior and exterior components will qualify for accelerated depreciation. This is great news because that means you can get these tax deductions NOW, rather than wait 27 1/2 for residential rental properties or 39 years for commercial properties to take place.

Here are some examples of components that will qualify for a cost segregation study: specialty lighting, specialty plumbing, partitions, carpeting, laminated floors, sidewalks/curbs, landscaping, asphalt, underground utilities.

What Type of Buildings Qualify

  • New Construction
  • Acquired Property
  • Build-outs
  • ā€‹Remodeled Property 

Benefits of Cost Segregation

  • An immediate increase in cash flow
  • A reduction in current tax liability
  • The ability to reclaim “missed” depreciation deductions from prior years (without having to amend tax returns)

Can My CPA Do This?

ā€‹The IRS states in the 2004 Cost Segregation Audit Techniques Guide:

“The preparation of cost segregation studies requires knowledge of both the construction process and the tax law involving property classifications for depreciation purposes.”

ELB Consulting, Inc. works as a strategic partner with CPA’s and Accountants. We enhance their business by providing them with the exact cost segregation information so they can give their client the best possible tax benefit allowed by law.

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ATTENTION!!!   ATTENTION!!!  ATTENTION!!!

NOT All Cost Segregation Studies are Created Equal

The difference between ELB CONSULTING and other Cost Segregation Providers is that THEIR insufficient methods can wind up costing YOU HUNDREDS OF THOUSANDS OF DOLLARS… and YOU don’t want that to happen! 

Here are the top 3 reasons why an ELB cost segregation study is superior to other cost segregation providers who are on the first page of Google:
The specialized engineers at ELB perform a “fully engineered and accounted” cost segregation study on commercial properties by assigning a value to EVERY COMPONENT of the building, whether it qualifies for cost segregation (5 year, 7 year, or 15 year property) or it doesn't qualify by keeping it in 27.5 year or 39 year property.  
 
In comparison: The typical 'engineering based or residual' studies from other cost segregation providers do not provide the same level of detail on accelerated property, and usually bundle the straight-line property in just a few categories causing you to miss out on TENS or even HUNDREDS OF THOUSANDS OF DOLLARS less in IRS deductions and their study causes scrutiny under an audit. 
 
Also, other firms utilize inaccurate modeling software and systems. Find out if they use these.
 
2. The cost segregation study you are paying hard earned money for should include asset management detail and abandonment.
 
ELB’s “fully engineered and accounted” methodology delivers complete asset management detail on all accelerated and straight-line items including hidden electrical, plumbing, and mechanical details. ELB’s report also serves as an asset management report allowing you to easily identify future abandonment / disposition of items for future upgrades, improvements or repairs, in full compliance with the IRS Tangible Property Regulations.
In comparison: 
The typical 'engineering-based or residual' studies from other cost segregation providers just identify standard items and FAILS TO ACCOUNT FOR all of the hidden electrical, plumbing and mechanical details.  Also, other providers will usually charge you additional money for an asset management report and an abandonment study.
 
 
3.  A professional cost segregation firm should have an in-house engineering department.
 
ELB utilizes our own staff of specialty engineers and construction specialists to complete all inspections and cost segregation studies... we NEVER outsource our engineering to outside firms or overseas professionals.
 
In comparison: Other cost segregation providers are known to outsource the engineering and site-inspections to lower priced workers to increase their profit on the cost segregation study. In fact, there are larger cost segregation providers who also outsource the engineering to professionals in Asia. 
 
Do your homework before choosing the right cost segregation firm.
 
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Disclaimer: Results will vary and it depends on the hard work, time and effort that is put in.

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