Cost Segregation
Maximizing Cash Flow with Cost Segregation
Simply said, Cost Segregation is the strategic process of creating a tax benefit by accelerating property depreciation to earlier years. By re-classifying components and improvements of your property from real property to personal property, you can potentially reduce your tax burdens significantly. At Boehm Commercial Group, we help Texas property owners move assets from a standard 27.5 or 39-year schedule to a 5, 7, or 15-year schedule, greatly increasing immediate cash flow and fueling future investment opportunities.
Accelerating Depreciation for Immediate Tax Savings
The core of Cost Segregation lies in timing. While all commercial buildings depreciate, the standard IRS timeline is often longer than necessary for specific components. Through a professional study, we identify assets that can be re-classified. For example, 5-year assets might include specialty lighting, cabinetry, and flooring, while 15-year assets cover land improvements like parking lots and landscaping. By front-loading these deductions, you keep more capital in your pocket today. Consider a case study: if you owe $100,000 in taxes but a study reveals $50,000 in accelerated benefits, your liability is cut in half instantly.
- Lowering your current liability to reinvest capital back into your business.
- Front-loading deductions to maximize the value of your dollar today.
- Providing the professional documentation needed to back up accelerated claims.
Comprehensive Cost Segregation Studies
The process begins with a detailed Cost Segregation Study. During this phase, experienced engineers identify and quantify property assets, assigning each a cost based on its depreciable class life. While the “shell” of the building remains a 39-year asset, many other components are moved into shorter-lived categories. This is not about creating new deductions, but rather expediting them so the taxpayer realizes the benefits sooner. We work closely with your tax professionals to ensure these deductions are applied for the maximum possible financial impact.
- Utilizing specialized property inspections to quantify every depreciable component.
- Capturing tax benefits now to increase immediate liquidity for new acquisitions.
- Providing engineer-backed reports that meet strict IRS permanent record requirements.
Versatility Across All Property Types
While office buildings, hotels, and retail spaces are the most common candidates, Cost Segregation can be performed on virtually any type of commercial or investment real estate. This includes self-storage facilities, industrial plants, car dealerships, and assisted living centers. Ideally, a study is conducted in the year of acquisition, construction, or renovation. However, “look-back” studies allow owners to capture missed deductions on properties built or renovated within the last 10 years, ensuring no money is left on the table.
- Applicable across all asset classes, from self-storage and industrial to retail and hospitality.
- Utilizing IRS Form 3115 to claim missed benefits without needing to amend prior returns.
- Identifying "hidden" tax savings within existing real estate holdings to fund new growth.
Determining Your Eligibility and Benefit
The ideal candidate for Cost Segregation is a company or investor who has recently constructed, acquired, or renovated a property with a depreciable basis exceeding $500,000. However, even building upgrades over $300,000 may qualify. It is important to note that you may not benefit if you have no federal tax liability or if you plan to sell the property in less than four years. For those committed to long-term growth in the Texas market, this remains one of the most powerful tools for tax deferral and wealth preservation.
Partner with Boehm Commercial Group
At Boehm Commercial Group, our mission is to be a source of value for our clients through integrity and expertise. We understand that navigating IRS regulations and engineering reports can be daunting, which is why we guide you through every step of the Cost Segregation process. If you are ready to unlock hidden cash flow in your commercial real estate portfolio, contact us today. Let’s work together to ensure your investment works as hard for you as possible.
