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During these unprecedented and economically challenging times in our nation many small businesses are experiencing extreme cash flow shortages. Many businesses have been forced to shutter their doors and lay off employees without any preparation nor prewarning. While their businesses are shuttered and many are trying to wait out the storm their fixed costs such as rent, mortgage, utilities, and insurance, still have to be paid. In general, most small businesses have 90 days of cash in reserve max. And IF you are able to get a government loan that comes with qualifications, restrictions, comes very slow, and is a band-aid attempting to cover a major artery cut. And at the end of the day, a loan will eventually have to be repaid. What is the solution?

According to an taxprotoday.com July 02, 2019 article, “Cost segregation studies should be in the back pocket of every commercial real estate investor. When optimized, they can increase cash flows, reduce tax liability, and uncover missed deductions.” But an engineered-cost segregation study tax strategy benefits anyone who owns or leases commercial property or building also. In essence, a cost segregation study allows the owner or lessee of real property to separate the purchase price, costs to construct a building, or improvements made to a building, along with other assets designated as “personal property.” These assets can then have their depreciation schedules shortened, thereby reducing the owner or lessee’s tax obligations.

Typically, a CPA or tax professional places the entire building and all of its components in the 39 years depreciation column. By having an engineered-cost segregation study done it will break down each component and value and qualify them via CSI codes [a method of arranging construction information based on functional elements, or parts of a facility characterized by their functions, without regard to the materials and methods used to accomplish them] to determine their shorter depreciable period that range 5 to 15 years, not just 39 years. Such components include:

  • Parking lot
  • HVAC
  • The electrical system.
  • Specialized kitchen equipment.
  • Carpeting.
  • Wall coverings.
  • Partitions.
  • Millwork.
  • A concrete slab floor.
  • The ventilation system.
  • Special plumbing.
  • Lighting fixtures.
  • The phone system.
  • The computer system.
  • Process piping.
  • Storage tanks.

The CARES Act Has Already Given You A Financial Bonus

90% of all commercial properties qualify for this program. Particularly for hotels, restaurants, apartment/nursing complexes, office/retainer complexes, shopping malls, manufacturing facilities, funeral homes, dealerships, golf courses, grocery stores, and medical facilities, can benefit from this strategy.

With the CARES Act, cost segregation offers several notable changes that include Bonus Depreciation available for select components, as well as the expanded time frame in which a business owner can recapture taxes paid in previous years (not extended to five open years). Business owners by in large had hugely profitable 2019 tax years and paid in accordingly. Thus, a large deduction by performing a cost segregation study could wipe out most if not all taxation for their 2019 tax year. Considering the vast majority of business owners have already pre-paid in heavily based on projected profits, this study instantly frees up the cash flow of all of the money pre-paid in, as well as the money they are about to pay in. Couple this with our ability to go back up to 5 years to recapture taxes already paid can be a HUGE financial shot in the arm for the business owner in these very challenging times. And this is YOUR money that does not need to be paid back. And we can have this cash in your hands within days, weeks, not months.

Cost segregation studies can cost around $10,000 to $15,000. But we work with the CPA and tax professionals of the business owner on a consignment basis. If we cannot find the business owner savings to his or her satisfaction, after doing a FREE NO OBLIGATION analysis, there is NO cost to them. On average, our clients have experienced for every $1,000,000 in building/property cost or construction cost a benefit of $75,000 in savings. When was the last time that your CPA or tax professional actually brought you a check of $75,000 or more?

During this COVID-19 crisis we help business owners discover money that they are already sitting on to not only get them through this period of time but, sit them up for better financial solvency, growth, and success moving forward.