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Will You Add? - Cost Segregation Study - Extra Depreciation & Cashflow Most Investors Overlook
Creating Financial Stability for Healthcare Providers
Tightening cash flows coupled with the likelihood of increased capital spending are a cause for concern among healthcare system executives. In a recent report by the Healthcare Financial Management Association entitled “Financing the Future”, some startling conclusions were reached regarding current capital spending:• The deteriorating financial condition of hospitals are making capital access more difficult.• The gap between “haves” and “have nots” are widening as to capital access, creditworthiness, and the ability to finance the future.As for the predictions of future capital expenditures, the
ership. Once the extra depreciation runs out, it may be a time to evaluate if you should exchange the property and repeat the whole process again.
Tightening cash flows coupled with the likelihood of increased capital spending are a cause for concern among healthcare system executives. In a recent report by the Healthcare Financial Management Association entitled “Financing the Future”, some startling conclusions were reached regarding current capital spending:• The deteriorating financial condition of hospitals are making capital access more difficult.• The gap between “haves” and “have nots” are widening as to capital access, creditworthiness, and the ability to finance the future.As for the predictions of future capital expenditures, the
CSS allows you to increase tax depreciation. This is not the same as accelerated depreciation which simply shifts a higher percentage of depreciation deduction to the early years. This accelerated depreciation is subject to Alternative Minimum Taxes while depreciation from CSS is not.
Who Can Benefit from CSS?
If you own any of the below, you should be able to benefit from CSS:
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Successful Entrepreneurs are Doer's - Not Dreamers
For many years I felt that if you scratched any American you were scratching an entrepreneur. This is the country where entrepreneurial activity is most possible and seemingly every citizen has an idea with commercial potential. Sadly, over time, I realized I was wrong. If you scratch most Americans you are most likely scratching a dreamer.The difference between a dreamer and a doer is profound. Successful entrepreneurs might have initially dreamt of success, but they will not stop there. The drive to accomplish necessary tasks to insure successful outcomes separates them from the dreamy class, which includes mo
Why Should You Care?
For many years I felt that if you scratched any American you were scratching an entrepreneur. This is the country where entrepreneurial activity is most possible and seemingly every citizen has an idea with commercial potential. Sadly, over time, I realized I was wrong. If you scratch most Americans you are most likely scratching a dreamer.The difference between a dreamer and a doer is profound. Successful entrepreneurs might have initially dreamt of success, but they will not stop there. The drive to accomplish necessary tasks to insure successful outcomes separates them from the dreamy class, which includes mo
Cost Segregation Study (CSS) allows you to claim 50-70% more depreciation on your commercial property. This reduces your income taxes and in turn increases your cash flow from the property.
What is Cost Segregation Study?
This IRS-defined engineering approach accurately classifies an investment property into two asset groups:
- Structural components which have longer depreciation schedule;
- Non-structural components, e.g. furniture, carpets, landscaping, plumbing, electrical, HVAC systems, parking lot which have shorter 5, 7, or 15 years depreciation schedule. So the more non-structural components the property has, the more extra depreciation you can claim.
CSS is normally done by an appraiser or an engineering company. The company will visit your property for a site inspection to fully understand its use and condition. It then provides you with a CSS comprehensive report. This report includes pictures and information to support and document the classification of costs according to the strict IRS-approved methodologies. The result of CSS is then given to your CPA or tax accountant for income tax filing.
Without CSS, you will just use the standard depreciation schedule for improvement: 27.5 years for apartments and 38.5 years for other commercial properties. This is the way 90% of investors are doing. So if you have not heard of this term, chances are you are not taking advantage of the higher depreciation the IRS allows you to.
Benefits to Investors
By shifting a portion of the property into the non-structural assets, CSS allows you to reduce your income tax by generating extra 50-75% depreciation tax deductions and thus increase your after-tax cash flow. The extra depreciation basically converts ordinary rental income at your current tax bracket to tax-deferred capital gain when you exchange the property.
Of course the higher your tax bracket, the more tax savings you will get. The saving is even more if you also have to pay state income tax as CSS is also allowed in state income tax return. These tax savings tend to occur in the first 5 years of ownership. Once the extra depreciation runs out, it may be a time to evaluate if you should exchange the property and repeat the whole process again.
CSS allows you to increase tax depreciation. This is not the same as accelerated depreciation which simply shifts a higher percentage of depreciation deduction to the early years. This accelerated depreciation is subject to Alternative Minimum Taxes while depreciation from CSS is not.
Who Can Benefit from CSS?
If you own any of the below, you should be able to benefit from CSS:
Have you found yourself falling into a slump with credit card debt that you are unsure of how to manage it? If so, then you should know that you are really not alone in this feeling. Many people, both young adults and the older generation will fall into credit card debt that they are not quite sure how to deal with.What you need to know is that even though your credit card debt can be a bit scary, there are usually ways that you can fix it and get yourself going on the right track to pay off your credit card debt as well as work on lifting your credit score. If you have credit card debt that is quite a bit highe
CSS is normally done by an appraiser or an engineering company. The company will visit your property for a site inspection to fully understand its use and condition. It then provides you with a CSS comprehensive report. This report includes pictures and information to support and document the classification of costs according to the strict IRS-approved methodologies. The result of CSS is then given to your CPA or tax accountant for income tax filing.
Without CSS, you will just use the standard depreciation schedule for improvement: 27.5 years for apartments and 38.5 years for other commercial properties. This is the way 90% of investors are doing. So if you have not heard of this term, chances are you are not taking advantage of the higher depreciation the IRS allows you to.
Benefits to Investors
By shifting a portion of the property into the non-structural assets, CSS allows you to reduce your income tax by generating extra 50-75% depreciation tax deductions and thus increase your after-tax cash flow. The extra depreciation basically converts ordinary rental income at your current tax bracket to tax-deferred capital gain when you exchange the property.
Of course the higher your tax bracket, the more tax savings you will get. The saving is even more if you also have to pay state income tax as CSS is also allowed in state income tax return. These tax savings tend to occur in the first 5 years of ownership. Once the extra depreciation runs out, it may be a time to evaluate if you should exchange the property and repeat the whole process again.
CSS allows you to increase tax depreciation. This is not the same as accelerated depreciation which simply shifts a higher percentage of depreciation deduction to the early years. This accelerated depreciation is subject to Alternative Minimum Taxes while depreciation from CSS is not.
Who Can Benefit from CSS?
If you own any of the below, you should be able to benefit from CSS:
<
Play Virtual Investing Game to Reduce the Risk of Failure in Real Stock Market
Do you want to become a shark of Wall Street? I bet you’d like to make some money like the aces in there, just by investing, investing and then investing some more. And earn couple of percentages from your money every single day?Couple of percentages isn’t much, or is it? Lets imagine that you’re playing with $500 000 dollars, lets imagine just for a moment. Two percentages of it is $10 000. When you compare this 10k with your initial investment of 500k, it’s not much. I know. But imagine if you could earn 2% income of your money each and every day. This means that after just one month you would have $300 000 ex
thodologies. The result of CSS is then given to your CPA or tax accountant for income tax filing.
Do you want to become a shark of Wall Street? I bet you’d like to make some money like the aces in there, just by investing, investing and then investing some more. And earn couple of percentages from your money every single day?Couple of percentages isn’t much, or is it? Lets imagine that you’re playing with $500 000 dollars, lets imagine just for a moment. Two percentages of it is $10 000. When you compare this 10k with your initial investment of 500k, it’s not much. I know. But imagine if you could earn 2% income of your money each and every day. This means that after just one month you would have $300 000 ex
Without CSS, you will just use the standard depreciation schedule for improvement: 27.5 years for apartments and 38.5 years for other commercial properties. This is the way 90% of investors are doing. So if you have not heard of this term, chances are you are not taking advantage of the higher depreciation the IRS allows you to.
Benefits to Investors
By shifting a portion of the property into the non-structural assets, CSS allows you to reduce your income tax by generating extra 50-75% depreciation tax deductions and thus increase your after-tax cash flow. The extra depreciation basically converts ordinary rental income at your current tax bracket to tax-deferred capital gain when you exchange the property.
Of course the higher your tax bracket, the more tax savings you will get. The saving is even more if you also have to pay state income tax as CSS is also allowed in state income tax return. These tax savings tend to occur in the first 5 years of ownership. Once the extra depreciation runs out, it may be a time to evaluate if you should exchange the property and repeat the whole process again.
CSS allows you to increase tax depreciation. This is not the same as accelerated depreciation which simply shifts a higher percentage of depreciation deduction to the early years. This accelerated depreciation is subject to Alternative Minimum Taxes while depreciation from CSS is not.
Who Can Benefit from CSS?
If you own any of the below, you should be able to benefit from CSS:
<
Top Paying Adsense Keywords - It's Not Just the Keywords...
Google adsense has been a magnificent way for webmasters to increase their revenue because they can turn their traffic into money. The more traffic you have, the more potential you have for earning money.Many sites on the Internet, including mine, give out information on the top paying adsense keywords. These are the keywords that have been bid on the most on Google Adwords or Miva etc. It must be said though that the figure advertisers are bidding for these keywords is nowhere near what you will receive as a webmaster.For example, let’s take the keyphrase “Car Insurance”. Advertisers are bidding between
allows you to reduce your income tax by generating extra 50-75% depreciation tax deductions and thus increase your after-tax cash flow. The extra depreciation basically converts ordinary rental income at your current tax bracket to tax-deferred capital gain when you exchange the property.
Google adsense has been a magnificent way for webmasters to increase their revenue because they can turn their traffic into money. The more traffic you have, the more potential you have for earning money.Many sites on the Internet, including mine, give out information on the top paying adsense keywords. These are the keywords that have been bid on the most on Google Adwords or Miva etc. It must be said though that the figure advertisers are bidding for these keywords is nowhere near what you will receive as a webmaster.For example, let’s take the keyphrase “Car Insurance”. Advertisers are bidding between
Of course the higher your tax bracket, the more tax savings you will get. The saving is even more if you also have to pay state income tax as CSS is also allowed in state income tax return. These tax savings tend to occur in the first 5 years of ownership. Once the extra depreciation runs out, it may be a time to evaluate if you should exchange the property and repeat the whole process again.
CSS allows you to increase tax depreciation. This is not the same as accelerated depreciation which simply shifts a higher percentage of depreciation deduction to the early years. This accelerated depreciation is subject to Alternative Minimum Taxes while depreciation from CSS is not.
Who Can Benefit from CSS?
If you own any of the below, you should be able to benefit from CSS:
<
Goal-Setting for Real Estate Investors
I just love real estate. I like it as an investment, but I also like construction, and the idea of creating something new from something old. Sometimes it’s down right hard not to fall in love with bricks and mortar.But we should all remember that investment real estate is a vehicle for improving our financial condition and achieving our goals, not a romantic notion. So before we go any further, repeat after me: “In 2006, I will only buy real estate that fits my objectives.”What ARE your objectives?Think about it. What do you really want real estate to do for you?…Make your savings grow fast
ership. Once the extra depreciation runs out, it may be a time to evaluate if you should exchange the property and repeat the whole process again.
I just love real estate. I like it as an investment, but I also like construction, and the idea of creating something new from something old. Sometimes it’s down right hard not to fall in love with bricks and mortar.But we should all remember that investment real estate is a vehicle for improving our financial condition and achieving our goals, not a romantic notion. So before we go any further, repeat after me: “In 2006, I will only buy real estate that fits my objectives.”What ARE your objectives?Think about it. What do you really want real estate to do for you?…Make your savings grow fast
CSS allows you to increase tax depreciation. This is not the same as accelerated depreciation which simply shifts a higher percentage of depreciation deduction to the early years. This accelerated depreciation is subject to Alternative Minimum Taxes while depreciation from CSS is not.
Who Can Benefit from CSS?
If you own any of the below, you should be able to benefit from CSS:
- Retail/shopping Center,
- Office building
- Restaurant
- Nursing Homes, Assisted Living Facilities
- Hotel/Motel
- Warehouse/distribution center
- Industrial building
- Public Storage
- Resorts
- Auto Repair Shop
- Auto Dealer Property
- Hospital, medical center
- Sport/entertainment Facility
CSS Companies
Below are a few companies that do CSS. Most companies will provide you with a free estimate for the CSS of your property. The author does not endorse any company.
- Commercial Cashflow Advisors, (408) 213-2530, www.ccashflow.com.
- O’Connor & Associates, (800) 856-7325, www.cutmyfederaltaxes.com
- Source Corp., (817) 732-5494, www.sourcecorptax.com.
Do’s and Don’t
- If you own commercial property valued at $1M or more, you should explore the benefits of CSS especially when you are at high tax brackets and can benefit from additional depreciation.
- Use the Cost Segregation Calculator on www.cutmyfederaltaxes.com. You just need to provide: property type, building cost, your tax rate, date of purchase and it will give you an estimated tax savings. Use this as a go, no go test to see if it’s worth pursuing further.
- Take advantage of free estimate most CSS companies offer. It tells you the costs of CSS, and estimated potential tax savings in the first 5 years.
- Don’t let the cost of CSS deter you. It costs money to make more money.
- Discuss the estimate provided by the CSS companies with your CPA or tax accountant to see if your CPA would advise you to proceed.
- You may want to consider CSS at the time of purchase of a commercial property as part of your investment and exit strategy.
- You will maximize the tax savings benefits if you hold the property for 5 years, i.e. it probably does not make sense to do CSS and sell the property shortly after that.
- If you own the property for several years, the IRS allows to “catch up” underreported depreciation from prior years by filing a form 3115.
- If you have remodeled and renovated your property, CSS can also recover a significant portion of the asset value which you have abandoned.
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