Tangible Property Regulations

Posted on March 6, 2018 by - Business Education

tangible property regulations

A Cost Segregation Study may be necessary to take advantage of Tangible Property Regulations benefits.

A CSSI study will provide you and your tax professional the calculations for various components and building systems. These calculations may be necessary to execute the “Repair Regulations” categories below:

Tangible Property Regulations

The final Tangible Property Regulations (2014) — a.k.a. “Repair Regulations”– are the largest change to US Tax Law in 30 years and affect every building owner in America. The final regulations provide a general framework for distinguishing capital expenditures from supplies, repairs, maintenance, and other deductible business expenses. Building owners and their tax professionals now have strict guidelines as to what stays on a fixed asset schedule and what must come off. Not only must every building owner in America follow and apply these regulations to their accounting practices, but there may be a financial upside to doing so. A CSSI study reviews the regulations to assist with compliance along with the financial benefit.

CSSI provides the necessary calculations for business owners to apply the Tangible Property Regulations; this is coordinated with your tax professional.

Improvements to a property, like window improvements, may qualify for partial asset dispositionPartial Asset Disposition (Write-down of disposed assets)

When a taxpayer makes an improvement to a unit of property, the project often includes demolishing or removing a portion of the property.  A write-down can be taken on the items removed from the building, but this must be done in the year the items were removed.  CSSI provides the calculation for Partial Asset Dispositions when business owners make improvements to their buildings.

Removal and Disposal Cost (Write-down of cost of removal and disposal)

A taxpayer who has made the Partial Asset Disposition election can also deduct the costs of a project associated with removing and disposing components of the building. This write-down would be done instead of capitalizing these costs with the improvement costs, but it also must be done in the year of the disposition deduction.  CSSI provides the calculation for Removal and Disposal Cost which occurs when improvements are made to buildings.

Tangible Property Regulations allow no ghost assets like your HVAC systemCapital to Expense Reversal (Write down of previously capitalized assets)

Have you replaced items in your building in the past? Replaced a roof or parts of a roof? Replaced HVAC equipment or completed entire renovation(s) to your building? The new Repair Regulations state that there be no “ghost assets” on your fixed asset schedule. Our CSSI study will find duplicate items that are currently being depreciated and identify them, along with their value, for a write-down. CSSI provides an analysis for the calculations to be applied for historical capital assets that may now be reversed to expense.


Bonus Depreciation – Tax-Saving Tool for Your Business

Posted on March 5, 2018 by - Business Education

Bonus Depreciation - Tax Saving Tool for Your Business

Bonus depreciation is a valuable tax-saving tool for businesses. It allows your business to take an immediate first-year deduction of 100% deduction on the purchase or renovation of eligible business property.

What is Depreciation?Depreciation of a building would normally be spread out over the life of the asset

Depreciation allows (or requires) businesses to spread out the cost of long-term assets over the life of the asset. The alternative would be to take the cost of the asset in the first year after the asset is acquired by the business, but this isn’t realistic. The most common way to depreciate a business asset is by spreading out the cost evenly over the asset life – called straight-line depreciation. Increasing in popularity, especially with the new Tangible Property Regulations, is the Cost Segregation Method or Accelerated Depreciation.

What is Bonus Depreciation?Accelerated Depreciation  allows you an additional deduction of 100% of the cost of qualifying property

Bonus depreciation is a method of accelerated depreciation which allows a business to make an additional deduction of 100% (this was 50% prior to the new Tax Cuts and Jobs Act passed last month) of the cost of qualifying property in the year in which it is put into service.  Bonus depreciation can be applied to any new asset with a 20 year life or less.  This includes land improvements which are not considered personal property.

  • The 50% Bonus Depreciation rate is increased to 100% for qualified property acquired or built after September 27, 2017.
  • Bonus Depreciation has been expanded to apply to both newly constructed buildings and used property purchased and acquired after September 27, 2017. Bonus eligible property must have a depreciable life of 20 years or less.
  • Qualified Leasehold Improvements, Qualified Retail Improvements, and Qualified Restaurant Property are all replaced with Qualified Improvement Property (QIP), which has a 15-year recovery period and is eligible for 100% bonus (restaurants now have a class life of 39 years).
  • Structural items like interior supporting framing, escalators, and elevators are not included in QIP. The improvements must have begun at least one day after the building was put in service for its intended use.
  • Items removed, discarded, or abandoned have value that should be removed from the depreciation schedule and identified as a partial asset disposition (PAD). This must be done in the same tax year as the removal or the tax payer loses the ability to capture the write down.

If you own commercial or income property and have not had a conversation with a trusted cost segregation provider and your Tax Professional, don’t wait. Do it today.

7 Things a CPA Needs to Consider when Deciding on a Cost Segregation Partner

Posted on June 7, 2016 by - Business Education


Including cost segregation into your CPA practice will benefit you and your clients by expanding your business and offering a service requested by many. It is important to know a few things about your potential cost segregation partner. When looking into firms that specialize in cost segregation, you’ll want to make sure they meet a few requirements before you partner with them. You want them to become an asset to your firm. Below, you’ll find a list of questions that you should ask each cost segregation firm before you commit to anything.

  1. Is the cost segregation firm you are considering an expert in the tangible property regulations? Whether your firm has become highly or only partially educated on the Repair Regulations, your cost segregation partner should be able to calculate complex issues for all of your clients who qualify. When a cost segregation firm is an expert in the repair regulations, they will quickly be able to step in as your calculation experts offering immense savings to your clients and potential consulting fees to your firm.
  2. How long have you been in business and how many cost segregation studies has your firm done? It’s good to know the firm’s history and experience in the industry. You need to know that they will be there for your client if an audit occurs.
  3. Who is performing the study? A cost segregation study is a technical process that requires knowledge in both construction and engineering. It’s important to find a firm that performs every facet of the work in-house that goes into the cost segregation.
  4. Cost segregation studies can be performed using different methodsWhat method does the firm use to perform the cost segregation study? There are several methods that a firm can use to perform a study but not all are created equal. You want to make sure the firm you choose uses an engineering approach to reduce the risk in the event of an audit.
  5. Does the firm provide a complete report? The study needs to offer the preferred 13-point conclusion. It is important to establish that a report will be made and given to both the tax professional and the client when the study is complete. See U.S. Tax Code Guidelines.
  6. In the event of an audit, who will defend the work? This is important for your client’s peace of mind because they’ll know they won’t have to face an audit by themselves and that the firm will defend its study.
  7. Ask for references. As with any important relationship, references will give you the peace of mind knowing that your cost segregation partner provides on time, accurate, and bullet-proof results.

Expanding your services is an important matter. As a professional, you want to maintain the same level of quality your firm has provided for years when adding another service that includes bringing in outside help. These questions will help ensure you find a cost segregation firm that meets your standards and provides a quality service to the customers that trust you.

Should I File Form 3115 or Not?

Posted on August 11, 2015 by - Business Education


Tax season and the days leading up to tax season can be a hectic and stressful time. Every one of your clients is expected to file returns correctly and on time. Making your job more difficult this season is the new Tangible Property Regulations (TPRs) that require some businesses to file a form 3115, a form you have never even seen before.

Well, we’re here to simplify tax jargon so you don’t file a form that doesn’t need to be filed and help you plan ahead if a 3115 is required.

According to U.S. Tax Code, a Form 3115 is a “request to change in either an overall method of accounting or the accounting treatment of any item.” Generally, this form is typically filed by businesses. However, Forbes says that a 3115 form may also apply to individual taxpayers and estates.

Before the new TPRs, Forbes stated that most taxpayers only filed the form when there was a significant change, and that didn’t happen often. The new regulations changed everything.

With the new TPRs, “almost every federal tax return for businesses that own tangible property should have at least one Form 3115 or an election statement that the taxpayers will need to file to adopt the rules under the final regulations,” said Christian Wood in the Journal of Accountancy. Wood, quoted in Forbes, continued to say that this form is required in order to adopt the materials-and-supplies provision, the new Improvement Standards and many of the “Safe Harbors.” If taxpayers with over 10 million in annual receipts do not include this form, their change in accounting methods will not be unauthorized under the law.

There are no IRS fees associated with Form 3115The tax community is split on whether or not all businesses should file at least one 3115, but because there aren’t any fees for filing or risks involved to your client, it doesn’t hurt them if you file one on their behalf. So, if your client can benefit from any of the tax saving opportunities from the new TPRs, a 3115 should be filed in most cases.

Additionally, Form 3115 allows you some audit protection from previous years. By filing, you’re following tax code, and you are compliant with the new TPRs. If you are compliant, the “use it or lose it” regulation (1016-3) will not be imposed on you.

You might have to file more than one 3115 form, which can be time consuming. It would be smart to consult with CSSI so that you can prepare the form correctly the first time and allow us to review other depreciation schedules to ensure no additional opportunities exist.


How to Increase Your Cash Flow Using Cost Segregation

Posted on August 4, 2015 by - Business Education


Every business is determined to increase cash flow. The first rule of business is to stay in business and cash flow is imperative to that rule. But, what you may not know is that if you’re not taking advantage of cost segregation, you’re actually diminishing your cash flow.

We’re going to explain to you how your business can easily increase its cash flow by using cost segregation.

Cost Segregation can save you thousands in building costs

Cost segregation is a way for commercial property owners to accelerate their building’s depreciation, saving significantly on federal, state and local taxes. Within the first five years of building ownership, you could save up to $100,000 for every $1 million in building costs.

To maximize cash flow, a building owner needs to have a cost segregation study conducted. At CSSI, we have a team of accountants and analysts who will segregate and accelerate the parts of your building that are deemed as non-structural. We conduct this through an engineering-based study to ensure we’re in compliance with the rules and regulations. After the analysis, your CPA will adjust the depreciation schedule of your building from the conventional 27.5- or 39-year, to a five-, seven-, 15-, 27.5- or 39-year schedule.

Benefits of a cost segregation study

Cost segregation accelerates depreciation time and gets you money backA cost segregation study will reduce your taxable income because of the accelerated depreciation and result in less of your hard-earned money being paid into state, local and federal taxes. Lastly, by reinvesting your tax savings, you’ll experience business growth, which will result in even more cash flow.

At CSSI, our tax experts will help your business generate more cash flow through our cost segregation studies. Contact us today and we can give you an accurate deduction estimate and gladly work with your tax professional.

 It’s your money, keep more of it.

Repair Regulations. Are you in Compliance?

Posted on July 22, 2015 by - Business Education, Industry Insight


The largest re-write of the U.S. Tax Code since the 1980’s may be just what your business needs. Take advantage of the new Tangible Property Regulations (also known as the “Repair Regs”). The Repair Regulations provide guidelines for building owners to make capitalization or expense decisions from 2014 and beyond. The Repair Regulations are very complicated but they offer significant economic benefits to building owners. Here are some of the highlights. (more…)

Will my Building Qualify for a Cost Segregation Analysis?

Posted on July 9, 2015 by - Business Education


After you’ve heard about the perks of performing a cost segregation study on your assets, you’re interested in what exactly you need to perform one. Now that you’ve decided that a cost segregation analysis is something you want to pursue, you need to make sure it’s the right choice for you. So, what do you need to do to make sure that a cost segregation analysis is the right answer for your business’ assets? (more…)

Choosing a Firm to Conduct my Cost Segregation Study

Posted on July 9, 2015 by - Industry Insight


When you’re dealing with taxes, you want to do everything exactly by the book.  So, when you’re implementing accelerated depreciation of your assets, you want to be sure your cost segregation study is done correctly.  We’re here to help you get the tax savings you deserve and keep them by helping you choose a cost segregation firm that’s going to do everything right. (more…)

Why Cost Segregation?

Posted on May 4, 2015 by - Business Education


What if this could be the year you take that large on your income tax return? You could possibly get thousands, and possibly millions in positive cash flow.  If this sounds too good to be true, we can assure you that this happens every day. A cost segregation study is a type of analysis that is completely in compliance with all U.S. tax code regulations and recommended according to the Journal of Accountancy. (more…)