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As we approach the end of the year, businesses are focusing on strategies to save money and make financially sound decisions for 2024. A key approach in this endeavor is cost segregation, an effective method to increase near-term cash flow by deferring federal and state income taxes for new constructions, renovations or newly acquired buildings through accelerated depreciation deductions.

A cost segregation study accelerates depreciation deductions for real estate, identifying building components for shorter depreciation periods than the standard 27.5 or 39 years. This process, involving engineering analysis and tax expertise, reclassifies elements like non-structural features into 5, 7, or 15-year categories. The result is substantial early tax savings on the property.

Given the nuances of tax laws and compliance requirements, it's imperative to choose a cost segregation partner with the knowledge and experience to tackle these challenges and tailor their approach to your specific situation.

After all, their expertise directly impacts the study's success due to the numerous intricate elements involved.

Here are essential factors to consider:

Comprehensive Tax Knowledge

A cost segregation partner well-versed in tax regulations and changing laws will ensure your study aligns with the most current tax codes, thereby maximizing potential savings while minimizing risks of non-compliance. Their deep understanding of taxes also enables them to navigate complicated tax scenarios, provide accurate tax benefit estimations and craft strategies tailored to your specific financial situation.

An In-House Team of Cost Segregation Experts

Selecting a firm that houses all essential experts, from tax professionals to engineers, under one proverbial roof for your cost segregation study ensures a quicker turnaround and a more integrated process. Having all necessary parties within the same company fosters a holistic and seamless approach, enhancing communication and coordination among everyone involved.

In contrast, firms that outsource to external engineers may face delays, as these subcontractors often manage multiple projects simultaneously, potentially slowing down your study's progress.

Attention to Detail

A partner skilled at identifying all eligible assets for accelerated depreciation can greatly enhance your tax savings. Precise and thorough reporting is also paramount for compliance, ensuring every facet of the study is accurately documented.

Additionally, a stringent review process plays a critical role in reducing errors, thereby producing a final report that is not only trustworthy but also defensible.

A Worthy Investment

When selecting a service provider, no matter the field, the best choice often isn't the most inexpensive. Investing in quality pays dividends, especially in the realm of cost segregation. With its numerous moving parts and the need for highly skilled knowledge, only the best service can ensure you maximize tax savings and maintain full compliance. A valuable cost segregation partner is one that offers a team with extensive experience across a variety of property types. This diverse expertise enables them to address unique challenges and defend their reports effectively against IRS audits, contributing to a more robust and resilient study.

In addition to their expertise, ensure your chosen partner includes audit protection as part of their service fee. This feature offers you representation if the IRS should challenge your report, adding an asset, and demonstrating the provider's capability to stand by their work under scrutiny.

Going the Extra Mile

When selecting a cost segregation professional, just remember that the right expert offers more than just a service; they serve as a dedicated consultant, guiding you through the labyrinth of cost segregation.

At CBIZ, our team of experienced cost segregation professionals is well-prepared to offer this kind of support. Our in-house specialists, including specialized engineers, are dedicated to delivering a customized approach to each project. We pride ourselves on meticulous and accurate handling of all aspects of your cost segregation study, from engineering analysis and tax review to report preparation and quality control. We ensure all auxiliary and supplemental documentation is managed with the utmost precision, offering fast turnaround times.

With CBIZ, you have the convenience of getting all your questions answered in one place. Connect with our professionals today.

Copyright © 2023, CBIZ, Inc. All rights reserved. Contents of this publication may not be reproduced without the express written consent of CBIZ. This publication is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional advice. The reader is advised to contact a tax professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

CBIZ MHM is the brand name for CBIZ MHM, LLC, a national professional services company providing tax, financial advisory and consulting services to individuals, tax-exempt organizations and a wide range of publicly traded and privately held companies. CBIZ MHM, LLC is a fully owned subsidiary of CBIZ, Inc. (NYSE: CBZ).