Owners of commercial real estate are always trying to improve their bottom line. When times are good and demand for space is high, they will try to get more rent from tenants, and will also try to get them to reimburse the landlord for more of the project expenses. Landlords also pay a lot of attention to cost control on those items that they think they can improve upon. Still, through all of that, there is something that can save many commercial property owners a whole lot of money that most of them don't even know about. It's called cost segregation.
As many of you know, when an owner buys or builds a commercial building, they can depreciate the building (but not the land) over a 39 year period on a straight line basis. However, many of the items that go into the construction of a building are not necessarily considered to be "real estate" by the Internal Revenue Service. To the extent that such items can be re-classified as personal property (as opposed to real estate), they can be depreciated far more quickly than the real estate can.
According to one well-known cost segregation professional, cost segregation is applicable to eighty percent of commercial properties, and has been approved by the IRS and endorsed by the AICPA. The percentage of total cost basis that can be re-allocated varies between 20% and 40%, depending upon the property type and upon other factors.
If your clients own commercial property, you might think about urging them to consult a professional that specializes in cost segregation. It could save them a lot of money, and could substantially increase the return on investment of their properties.
Comments(0)