Article Side

Online Article Directory!

Hello Guest! Login or Register to submit articles!

Tax Reduction Affected by Cost Segregation

By Patrick O Connor Subscribe to RSS | July 10th 2012 | Views:
loading
 
  



Tax reduction is just one of the benefits of cost segregation. Many real estate owners and tax preparers believe cost segregation simply defers payment of taxes. While they recognize it effectively generates an interest-free loan from the government, they do not understand it also provides tax reductions in most cases.

For most real estate owners (corporations are the exception) income is characterized as either ordinary income or capital gains income. It is not intuitive, but cost segregation changes the character of income from ordinary income to capital gains income providing tax reductions of up to 20%. This occurs because the additional depreciation is a tax deduction that reduces ordinary income. When the property is sold, it is recognized as capital gains income. Having more tax deductions increases tax reduction.

Since a portion of the cost basis is allocated to short-life improvements, some owners and tax preparers express concern that the depreciation will be recaptured when the property is sold (at a tax rate of 25-35%).

When a property is sold, the owner and the tax preparer typically collectively review the sales price and depreciation schedule to allocate the sales price between land, short life property, long life property, and profit. After reviewing the condition of short-life property, it is usually determined the value is similar to the depreciated basis (book basis). Hence the depreciation is not recaptured since there is no gain upon sale.

This is reasonable and appropriate since the short-life property depreciates more rapidly than the structure of the building. Short-life property includes items such as carpet, vinyl tile, paving, and parking lot striping. These items do physically depreciate from use and weather (if outdoors).

The capital gains rate (maximum of 15%) is less than half the ordinary income tax rate (maximum of 35%). By converting the character of income from ordinary income to capital gains income, cost segregation identifies tax reductions by reducing the reduces tax rate by over 50% (for income shielded by cost segregation). In addition, cost segregation defers payment of taxes from the year it is earned until the year the property is sold.

Cost segregation produces tax deductions and reduces federal income taxes across the country and in every size market. Below are just a few examples of where cost segregation generates meaningful tax deductions.

City:

Atlanta, GA ; New York, NY ; Memphis, TN ; Miami, FL ; Orlando, FL ; New Orleans, LA ; Hartford, CT ; Dallas/Ft. Worth, TX ; Washington, DC ; Denver, CO ; Akron, OH ; Buffalo, NY ; Jacksonville, TN ; Chicago, IL ; Toledo, OH ; Harrisburg, PA ; Birmingham, AL; Augusta, GA ; Lakeland, FL ; San Antonio, TX; Jackson, MS ; Little Rock, AR ; Pittsburg, PA ; Sarasota, FL ; Chattanooga, TN ; Manchester, NH ; Youngstown, OH ; Riverside, CA ; Syracuse, NY and Wichita, KS

Cost segregation produces tax deductions for virtually all property types.

Property Type:

Manufacturing/processing , Tennis club , Retirement home , Auto service garage , Mini-warehouse , Single-tenant retail , Medical facility , Hotel , Retail and Vacant land

Almost every industry, including the following, can generate cost-efficient tax deductions by using cost segregation.

Industry:

Mineral product manufacturing , Electronic and appliance stores , Frozen food manufacturing , Non-durable good wholesalers , Furniture manufacturing , Food manufacturing , Chemical manufacturing , Automotive repair facilities , Amusement parks and Leather product manufacturing.

Patrick O Connor - About Author:
O'Connor & Associates is a national provider of commercial real estate services including federal tax reduction,Commercial Real Estate Appraisal, cost segregation, feasibility studies, insurance valuations, Houston Property Appraisal, gift tax valuations and real estate market studies.

Share on Facebook Tweet It Stumbleupon this post This post is delicious !

Article Source:
http://www.articleside.com/finance-articles/tax-reduction-affected-by-cost-segregation.htm

Related Finance Articles Subscribe to RSS

Freelance: Take a Step into the World of True Liberty
Published by Crowin Smith on March 14th 2012 | Finance
The society makes the rules for the people to live in a certain way, and people tend to become habit...
 
12 Month Loans - an Instant Cash Solution During Emergency
Published by Satty Jones on May 30th 2012 | Finance
12 Month Loans are usually unsecured in nature. You can easily access it without any pledge of colla...
 
Advantages and Disadvantages of Car Leases
Published by Freddie Wade on May 12th 2012 | Finance
It is now possible to enjoy good car leasing options with the many leasing firms available in the ma...
 
Business Consultants Giving Business Owners the Power They Need
Published by Lenora Morgan on March 23rd 2012 | Finance
Dependable leadership is something that each business proprietor has to sharpen....
 
Loans for People on Centrelink: Rescuer in Emergency
Published by Adam Raymond on January 13th 2012 | Finance
Loans for people on centrelink are offered against the paycheck of the next month. Loans for people ...
 
Applying for unsecured loans with the similar lender for assistance
Published by Ian Foster on February 8th 2012 | Finance
Unsecured loan lender can be obtain by applying for a second loan and are worth considering and fre...
 
Charles Moni is a Philanthropic Humanitarian
Published by Royfernandes on January 17th 2012 | Finance
Charles Moniis a Philanthropic Humanitarian Charles Moni is well known in the financial circles as a...
 
Put an End to Your Money Woes with Credit Card Relief
Published by Michael Lenzner on May 17th 2012 | Finance
For many consumers if not most, the first step for regaining control of their financial future start...
 
Loans for Bad Credit People: Weak credit is no more a trouble
Published by Ella Trant on June 8th 2012 | Finance
People with bad credits can realize their urgent monetary needs with loans for bad credit people wit...
 
In Search of a Debt Helpline
Published by Deby Suportie on May 2nd 2012 | Finance
In case you have debt concerns, there’s debt helpline. When you are struggling to cope with your f...
 
Debt Consolidation San Diego Companies- Handle multiple Debts with Ease
Published by James Blee on May 3rd 2012 | Finance
There is no specific reason or circumstance that compels people to avail loans. While there are some...
 
Same Day Loans are Made Simple with Payday Mart
Published by Adair Sawyer on December 2nd 2011 | Finance
Are you tight on cash? Has a situation presented itself that needs your immediate financial attenti...
 
Why a business cash advance has more benefits than small business loans
Published by Joseph Richard on April 4th 2012 | Finance
Every small business knows how difficult it is for one to get a small business loan these days. With...
 
The insight story of different types of bonds
Published by Fixedincome on April 20th 2012 | Finance
The government treasury bonds are basically issued by the government in order to pay for the various...
 
How an Underwriter Can Make Your Commercial Real Estate Loan Application Experience More Pleasant for You?
Published by Edmund Brunetti on April 9th 2012 | Finance
In today’s dynamic environment it is considerably more difficult to finance a commercial real esta...
 
Florida Homeowners Insurance Companies are True Professionals
Published by James Blee on April 24th 2012 | Finance
Presence of true professionalism is one factor that determines the healthy relationship between the ...
 
Payday Loans : Instant Help in Hour of Need
Published by Sherry Joy on March 17th 2012 | Finance
There is no limit on the number of times this loan can be accessed. Nevertheless, one should be care...
 
The Great Global Macro Experiment, Revisited
Published by Boombustblog on March 4th 2012 | Finance
Looking for completely Stock market update and finance services? Then visit Boombustblog and find ba...
 
Bankruptcy - Automatic Stay and Multiple Filings
Published by Joseph Githuku on August 5th 2012 | Finance
As Baltimore Bankruptcy attorneys we routinely see individuals who have been compelled to file more ...
 
Indiana Auto Insurance
Published by Insuranceindian Aauto on January 12th 2012 | Finance
Indiana has around 360 auto insurance agents who are registered with the state. Indiana has populati...
 
The Benefits of Financial Advice Leeds
Published by Fredrick Gavin on August 24th 2012 | Finance
You work hard for your money and you therefore need to ensure that you properly manage it so that yo...
 
The Benefits of Financial Advice Leeds
Published by Fredrick Gavin on August 24th 2012 | Finance
You work hard for your money and you therefore need to ensure that you properly manage it so that yo...
 
Pensions in Leeds
Published by Fredrick Gavin on August 24th 2012 | Finance
Pension is a money received after retirement or end of a work agreement. It is mostly associated wit...
 
Pensions in Leeds
Published by Fredrick Gavin on August 24th 2012 | Finance
Pension is a money received after retirement or end of a work agreement. It is mostly associated wit...
 
Pension in Leeds
Published by Fredrick Gavin on August 24th 2012 | Finance
Leeds has many financial advisors especially those dealing with pension. Pension is very important e...
 
Pension in Leeds
Published by Fredrick Gavin on August 24th 2012 | Finance
Leeds has many financial advisors especially those dealing with pension. Pension is very important e...