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.
Do you have a Capitalization Policy in place that allows you to write off purchases of less than $500?
With the new TPRs, commercial real estate owners are allowed to write off items purchased up to $500 per item on an invoice. To be eligible requires a capitalization policy in place and to make the correct election on the return annually along with a statement on the return.
Are you planning to do an upgrade or an Improvement to the building?
A qualified small business taxpayer (less than $10M in assets or gross receipts) can now write off improvement expenditures on a building up to $10,000 or 2% of the building basis on all buildings less than $1M. This write off is an annual election.
If the building requires anticipated repairs more than once every 10 years, a building owner may not have to capitalize their next maintenance event. CSSI can help you learn how to take advantage of the new “Routine Maintenance Safe Harbor.”
Increased Record Keeping?
To take advantage of these deductions, expenses now need to be tracked on a per building basis per site. Each building is now its own unit of property. And taxpayers may be forced to reassign a starting depreciation basis to each building on a site based on new “unit of property” guidelines.
It’s complicated. But we can help you get back to making it simple. Switching to a cost segregation depreciation method will answer these questions and help you take advantage of the new regulations vs. the new regulations taking advantage of you.
What is Cost Segregation and how can building owners benefit?
Most people are unaware that there are two ways to depreciate your commercial property. You can do so straight line over 40 years. Or you can segregate parts of your property into shorter tax lives and depreciate it faster. It is called cost segregation. Cost segregation studies typically generate between $40,000 to $60,000 of additional cash flow back to the owning entities. But you have to choose the right depreciation method.
As a building owner, this means you likely will receive an infusion of cash flow from the tax savings of 6% to 10% of the cost of your facilities. CSSI’s engineering based study accelerates the depreciation on many of the non-structural building components because they don’t last 39 years (i.e. flooring, cabinets/millwork, parking lot, security systems etc.). We move them from a standard 39 year depreciation schedule to the much faster 5, 7 and 15 year depreciation schedules. That entire additional write off translates into new cash flow that goes right into the owner’s bank account.
The Rules of the Game Have Changed
Ask your tax professional about the new TPR’s but be aware that they are probably new to them as well. The TPRs have given tax professionals a lot more work to do but most are not trained construction engineers and are generally unaware of all the non-structural building components inside the walls of your building. Most tax professionals agree that engaging a firm that has significant construction and structural engineering knowledge of your buildings and can identify the building components that go in to the appropriate tax life categories.
CSSI will collaborate with your tax professional to keep you compliant with the Repair Regs and help find you the economic benefits allowed by the TPRs. Building owners can expect to receive significant cash flow and multi-location owners could receive hundreds of thousands, or even millions of dollars. You cannot afford to miss this kind of opportunity.
Don’t throw away your deductions. What went into the dumpster can now be written off your books. If the roof was replaced, old doors discarded, or possibly HVAC units swapped out, this is the last chance to take advantage of the Repair Regulations and allow owners a tax deduction for discarded items that are still buried in the depreciation schedule.
Even owners that filed their taxes for 2014 can still amend the return to take advantage of this “Use it or Lose it” opportunity. For some owners, this could be a huge deduction to write off items now or continue to depreciate them for the next 20-40 years.
Friends don’t let friends over pay their taxes.
CSSI offers all building owners in America a complimentary predictive analysis to allow you, together with your CPA/Tax Professional, to make a well informed business decision on which options are best for your company. Don’t throw away your deductions. Improve your cash flow situation today.
Order your complimentary predictive analysis today. CSSI will have your results will be back to you in 2 days.