Act Now – Lock In Cost Segregation Study Impacts for 2017 Tax Year
May 18, 2018 - By: SC&H Group
Maximize Deductions for the Higher Tax Rates in 2017 or Start Planning for 2018 Real Property Purchases and Construction
With the passage of the Tax Cuts and Jobs Act (TCJA), companies are in a crunch to maximize their 2017 tax year deductions before tax rates drop and reduce the value of their deductions.
Simply put – Cost Segregation Studies (CSS) are essential and the remaining time left for studies for 2017 extended returns is running out. These studies are a valuable tool that can help maximize both current deductions and future benefits following tax reform.
What Is a Cost Segregation Study?
CSS can successfully allow real property owners to reclassify certain costs out of longer life assets into shorter life assets. By significantly increasing depreciation expense in the early years of the property’s life, the tax savings can help owners realize substantial increases in cash flow that can be used to reinvest into the business or distribute to owners.
How Does Tax Reform Impact CSS?
CSS performed now can move deductions into 2017. With lower rates in 2018 and moving forward, a $500,000 deduction in 2017 instead of 2018 could save a taxpayer up to $13,000 in federal taxes alone due to the change in tax rates.
We advise companies to take advantage of these additional tax savings now for any property purchased, constructed, or renovated in 2017 or prior years. If you have already filed your 2017 tax return, or placed real property into service in 2018, it is not too late to take advantage of the benefits of a CSS for the 2018 tax year.
With the advent of the TCJA of 2017, a CSS can provide even more benefit due to the substantial changes to the rules for Code Section 179, bonus depreciation, and Qualified Improvement Property. Taxpayers can maximize current deductions by the way of accelerated depreciation, recognize lower tax burdens, and optimize after-tax cash flow.
SC&H Can Help
Do you want to apply this tax strategy to your operations? This is where SC&H Group can assist. We provide a free estimate for the present value benefit from a CSS and if we don’t believe that a study will provide you tax savings, then there is no need to invest time and money.
We encourage you to Contact Us to discuss any CSS questions or concerns you may have regarding real property that your company owns.
Determining your 2018 tax strategy roadmap? Plot your course with our comprehensive TCJA resources.