Industrial and manufacturing companies can start receiving more money back on their properties by using a strategic tool tax known as a cost segregation study.
This study takes facilities like manufacturing and Industrial plants that usually depreciate over a period of 27 to 39 years and cuts the depreciation time to 5, 7, or 15 years. Lessening the time it takes to receive these tax deductions can directly impact the amount of money manufacturing companies are making on their properties and allows them to reinvest in additional properties as well.
What Is Cost Segregation & When Does It Apply?
Cost segregation studies are engineering-based studies that give property owners an exact tax plan to accelerate property depreciation to increase cash flow for owners. The study aims to reclassify certain assets of the facility depending on various aspects of the building.
The study is normally performed on facilities that are being constructed, for companies or owners who have recently bought an existing facility or years after disposing of a facility as long as the disposition is open under the statute of limitations. The study can also be performed for businesses that have renovated or expanded their manufacturing facility.
Usually, the study will divide the property into four different asset types:
- Personal property
- Land Improvements
By segregating your property cost, your company will be able to claim a larger range and gain more cash flow.
Bonus Depreciation For Manufacturing Properties
When it comes to manufacturing and industrial facilities, your company may be able to receive faster depreciation deductions and additional write-offs. If a cost segregation study is performed and your real property qualifies to be reclassified as 5, 7, or 15-year personal property, you could be looking at potential bonus depreciation.
These depreciations are 30 or 50 percent bonus depreciation that can apply to the new property the first year it’s put into use or service. These bonus benefits can provide an extra cash flow to help businesses invest in and fund other projects they may have.
Let Our Team Of Experts Help You
Making sure your company gets the most of its cost segregation study can be challenging. That’s why it helps to connect with a team of tax specialists.
Here at National Tax Group, we have a team of tax professionals who partner with qualified engineers to help with your cost segregation study needs so you can feel confident you’re receiving the maximum tax benefits possible. Give us a call at (561) 257-3436 and talk to one of our specialists to find out more.