2022 Houston Year-End Tax Forum
With its broad expertise, the Firm has established Marcum’s Cost Segregation Group as a team of professionals who specifically focus on helping clients realize the benefits related to cost segregation.
The Group is uniquely positioned to guide commercial and residential property owners and lessees through the recent tax rulings that have opened the door to significant savings.
A Cost Segregation Study (CSS) is a tool used to realize the benefits of Cost Segregation under the tax law. Thus, a CSS is the process of producing various analyses and reports (prepared by qualified engineers, appraisers and financial advisors) that provide the support and basis for accelerating periods of depreciation.
A building acquired for $1.9M depreciated over a 39-year life will have an annual tax deduction of approximately $48,000. Over a four-year period, the total deduction would amount to approximately $192,000.
With a Cost Segregation Study, qualified components of the building would be reclassified from 39 years to 3-, 5-, 7-, and 15-year lives resulting in a revised depreciation deduction of $488,000 over the same four years. Over the life of the building, the cash flow savings as a result of a CSS would be approximately $124,000. The savings is computed by applying a 44% tax rate over the additional accelerated depreciation of $296,000, utilizing in this case, an 8% discount rate.