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.
Partial 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.
Capital 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.
By: Micki Jerry, Director of Marketing