By Pat O Connor
Tax reductions and tax deductions are a common benefit of cost segregation. When real estate investors and tax practitioners learn about the income tax deductions and tax reductions resulting from cost segregation they are sometimes skeptical; they are concerned it is a tax shelter or tax scheme. This simply is not true. Cost Segregation provides a legitimate tax reduction.
The IRS has published the Audit Techniques Guide (ATG) describing cost segregation and the proper methodology to achieve maximum tax reductions. They report cost segregation is a more accurate method of depreciating real estate (since it establishes a depreciation schedule based on the appropriate life for each component). Depreciation is a key component in tax reductions.
Cost segregation is not difficult conceptually. It involves separating components of the real estate (such as carpet, vinyl tile, paving, sidewalks and landscaping), which have a shorter economic life and depreciate over a shorter period of time. The IRS has generally defined which components qualify for short life depreciation in the ATG. The ATG provides a safe harbor for real estate owners who depreciate real estate consistent with its guidelines.
While cost segregation is simple in concept, its application is somewhat arcane. For example: why is a roof long-life property (39 years for commercial property) while concrete paving is short-life property (15-year property). Most owners would agree the paving would outlive the roof. Another example: why are removable ceiling tiles long-life property while a tree is short-life property (15 years) in most cases.
The arcane nature of which components can be depreciated over a short-life basis derives partially from the impact of investment tax credit guidelines, which influenced the rules. In addition, court decisions and IRS guidelines have created rules that are not intuitive. However, for most components, rules have been clearly articulated to define their depreciable life.
These rules and guidelines for methodology in the ATG clearly define the IRSs position regarding cost segregation and benefit from authorized tax reductions.
Cost segregation produces tax deductions and reduces federal income taxes across the country and in every size market. Below are just a few examples of where cost segregation generates meaningful tax deductions.
City:
Boston, MA
Washington, DC
San Francisco, CA
Dallas/Ft. Worth, TX
Bridgeport, CT
Orlando, FL
Las Vegas, NV
Hartford, CT
Tampa, FL
Baltimore, MD
Allentown, PA
Grand Rapids, MI
Syracuse, NY
Lancaster, PA
Detroit, MI
San Diego, CA
Akron, OH
New Haven, CT
El Paso, TX
Buffalo, NY
Palm Bay, FL
Springfield, MA
Manchester, NH
San Jose, CA
Chattanooga, TN
Lakeland, FL
Greenville, SC
Rochester, NY
Santa Rosa, CA
Cincinnati, OH
Cost segregation produces tax deductions for virtually all property types.
Property Type:
Car wash facility
Used car lot
Hotel
Movie theatre
Mini-warehouse
School
Discount store
Cold storage facility
Drugstore
Self-storage
Almost every industry, including the following, can generate cost-efficient tax deductions by using cost segregation.
Industry:
Health care facilities
Golf courses and country clubs
Transportation equipment manufacturing
Printing activities
Mineral product manufacturing
Textile product mills
Textile mills
Day care facilities
Beverage and tobacco product manufacturing
Warehousing and storage.
OConnor & Associates is a national provider of commercial real estate consulting services including cost estate taxes, tax deduction, segregation studies, due diligence, renovation upgrading cost analyses, tax return review and apartment inspections.
Avoid Foreclosure In Raleigh, NC
By George Perez Sr
Homeowners who have trouble making mortgage payments in a timely manner may be subject to seizure
and the loss of title of their home. For these often well-intentioned individuals, unforeseen circumstances
such as job insecurity or medical issues have them facing the unfathomable-home foreclosure.
Regardless of the circumstances, it should and can often be avoided, with a little effort.
If you’re unable to make your mortgage payment, it’s absolutely critical that you call your lender now, in
order to stop foreclosure. Ignoring the bills will only make matters worse, increasing the likelihood that
you’ll lose your home for sure. Borrowers who seek foreclosure help early are much more likely to work
out an answer, no matter how dire their situation. Mortgage companies want to avoid foreclosure as much
as you; they’re much more interested in the money they make off your interest, rather than the money
they’ll lose on your home foreclosure. Based on your situation, your lender may be able to provide the
foreclosure help that you need.
Problems making your mortgage payment?
Here are a few options for individuals who can’t make their mortgage payments or could have short-term
financial problems and want to avoid foreclosure:
Forbearance
A brief agreement that delays payments for a short period of time. Mortgage lenders will
only allow forbearance if you can prove you’ll eventually acquire funds. Some common examples
would be a tax refund or a bonus where you can show future earnings that can bring your
mortgage up-to-date.
Reinstatement
If you’re behind on your mortgage payments, a reinstatement can take place when you make a
lump sum payment by a specified date, bringing your account back to current status. Lenders often
combine reinstatement with forbearance.
Repayment Plan
If you’re behind on your payments, the mortgage company may give you
a fixed amount of time to catch up, by combining a portion of your past
due amounts with your regular payments, allowing you to get current.
Loan Modification
The terms of your loan can be adjusted. Changing the amortization table
or lowering your interest rate can make a big difference, reducing your
monthly payment amount to something you can afford.
Short Sale
A deal between the homeowner and lender to sell the property for less than it’s worth, with the
mortgage lender taking the loss.
Pre-foreclosure sale
A pre foreclosure sale is an effective way of stopping foreclosure, allowing a default homeowner to
satisfy his mortgage obligation by selling the property in question for an amount less than owed. You
may qualify if:
1) The loan is at least 2 months delinquent,
2) You are able to sell your house within 3 to 5 months, based on what your lender agrees
upon;
3) A new (lender obtained) appraisal meets HUD value requirements.
Deed-in-lieu of foreclosure
This last resort allows you to “give back” your property to the lender. This will leave a mark on your
credit record, but it will stop foreclosure, which is much more severe.
Taking a pro-active approach to home foreclosure avoidance can’t be stressed enough. If you lose your
home to foreclosure, the lender may come after you to recover money owed that may not have been
recuperated in the property foreclosure sale. Having a house foreclosure on your credit report is
detrimental and ranks right up there with bankruptcy. Do not forget that as negative as things may seem,
your current financial problems are probably temporary. Avoid foreclosure now so that when you get
back on your feet, you won’t be restricted by looming credit issues.
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