There are several special tax advantages available to businesses and commercial property owners but have not been used. One of the main reasons this tax strategy is not utilized because most do not even realize they exist and they are eligible.
I would like to introduce you to one of these tax strategies that you may not only be aware of it but also that you might be able to take advantage of it. One of these specialized tax advantages is called an engineering-based cost segregation study. A peculiar tax saving approach allows commercial property owners to depreciate new or existing structures in the shortest amount of time permitted by tax law at this time.
In this type of cost segregation studies, certain costs previously classified as depreciable life of 39 years and not be re-classified as personal property and depreciated over a shorter time span than any 5, 7 or 15 years. Cost segregation history dates back to the ’70s and has evolved over the years to become what it is today.
Engineering based cost segregation appeared in 1997 as a result of a landmark court case tax Hospital Corporation of America v. Commissioner. Then in 2004, the IRS released the Audit Guidelines and techniques which make it clear that the process is expected to conduct a successful cost segregation study.
There are several different approaches that charge separation and I believe that most commercial property owners and tax specialists have been used to some extent. The biggest difference is, according to the IRS Audit Techniques Guide Chapter 3, that by using the engineering-based approach “.