Tagged: Tax savings

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.