Whether you are constructing, purchasing or expanding a building or relocating, Keiter can show you how your new property can significantly increase your cash flow by accelerating tax deductions. This process can also apply to property currently owned.

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A cost segregation study carefully breaks down construction and/or acquisition costs and allocates them to specific asset categories, maximizing depreciation for qualifying costs. Our study allocates such costs to personal property asset classes with lives shorter than real property asset classes. The shorter the depreciable life, the greater your tax deductions and cash flow.

A Keiter cost segregation study is based on an engineering approach combined with work paper documentation that provides the detail and support acceptable to the IRS and Tax Court.

  • Apartments
  • Car dealerships
  • Golf courses
  • Grocery stores/ shopping centers
  • Manufacturing plants/warehouses
  • Hospitals / clinics / medical offices
  • Hotels / motels
  • Industrial/office buildings
  • Parking lots
  • Research & development centers
  • Restaurants / theaters
  • Tenant improvements

Substantial tax and cash flow savings can be achieved by taxpayers who properly classify their construction or acquisition costs between real and personal property. Every $1,000,000 reclassified from 39 years has an after tax present value* of:

› $220,000 for 5 Year Property
› $200,000 for 7 Year Property
› $120,000 for 15 Year Property

For residential rental property, every $1,000,000 reclassified from 27.5 years has an after-tax present value* of:

› $180,000 for 5 Year Property
› $80,000 for 15 Year Property

The present values above do not include the bonus depreciation deductions authorized by recent federal tax acts. The Small Business Jobs Act of 2010 and the American Taxpayer Relief Act of 2012 extended and expanded upon the bonus depreciation provisions of the Economic Stimulus Act of 2008.

These provisions allow bonus depreciation deductions equal to 100% of the adjusted basis of qualified property** acquired between September 9, 2010 and December 31, 2011. These provisions also allow bonus depreciation deductions equal to 50% for qualified property acquired between January 1, 2008 and September 8, 2010 and between January 1, 2012 to December 31, 2013. The after-tax present value is substantially greater for those taxpayers that are able to take advantage of the bonus depreciation provisions.

*Assumes a 40% Tax Rate; 8% Discount Rate
**Qualified Property generally includes property with a recovery period of 20 years or less that is being put to its original use, and certain leasehold improvements.

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Vince Nadder

Partner

Paul Staples

Tax Senior Manager

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