Engineered Cost Segregation

Did you acquire a property or complete a large scale new construction or property renovation in the past few years? If so, then you may have an opportunity to accelerate your return on capital from these investments through engineered cost segregation.

Engineered cost segregation is a tax procedure authorized by the IRS that allows you to significantly accelerate the depreciation schedule for a variety of assets and improvements. Typically, buildings are depreciated on a schedule ranging from 27.5 to 39.5 years, yet many of the fixtures and improvements that make up the building can be depreciated in as little as 5 years! These improvements usually account for at least 20% of your property’s value, but for some properties this may be up to 50%. That can make a big difference in your cash flow. The key is to identify where these opportunities exist in your property, and Alternative Utility Services (AUS) can help you do this through an engineered cost segregation study.

Engineered Cost Segregation in Action

Our engineered cost segregation study is designed to bring engineering expertise and tax accounting together toward reducing your income tax liability. We start with a no-cost initial review where we will evaluate your current tax status and future business plans to determine if cost segregation is right for you.

If an engineered cost segregation study seems appropriate, an experienced engineer will review construction documents, evaluate construction costs by components, and conduct a facility visit to understand how building components are used. With an understanding of your building’s components, a reclassification of these components is completed as prescribed by IRS guidelines. AUS’s reclassification includes putting components into appropriate depreciation schedules and correctly allocating both direct and indirect costs for each component. Once we’ve completed reclassifying your building’s components, we work with your accountants to refile your tax returns to reflect the reclassifications made through the cost segregation study, including providing them the necessary forms for refiling. All you need to do is sit back and watch as your properties return more on investment and put more cash in your hand so you can grow your business.

Engineered Cost Segregation Vs. Traditional Deprecation