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Q. When can you take faster depreciation for real estate property?
a.   Any time you have a good enough reason
b.   Never
c.   When you segregate and document certain costs that are allowed to be depreciated more quickly
d.   When you construct certain upgrades to your property
e.   Both c. and d.

The answer is e

This tax saving opportunity is called component depreciation.  With the help of a cost segregation specialist, and all the documentation you have accumulated about your property and property improvements, it is possible to identify components that can be depreciated faster than is allowed for the property taken as a whole.

Buried tax savings can be discovered from:

·         New buildings currently under construction

·         Existing structures that are being renovated, remodeled, restored or expanded

·         New purchases of existing properties

·         Office/facility leasehold improvements and "fit outs"

·         Post-1986 construction, acquisitions or improvements where there has been no cost segregation study already conducted (even though the statute of limitations previously closed on the property construction/acquisition year).

Uncovering the components that can be treated separately from the whole property takes expertise, lots of in-depth study and plenty of documentation to back up the conclusions. But the resulting tax savings can be substantial.  Ask your tax advisor for more information about conducting a cost segregation study to substantiate component depreciation deductions on your tax return.
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.