What is Cost Segregation?

Cost segregation is a cash flow strategy that uses the IRS approved tax code to accelerate the depreciation of certain components of investment properties. This then frees up significant cash now rather than a tiny bit at a time using the standard long term depreciation period of 39 years for commercial properties.

You can then you can use that cash to reinvest into your property for improvements or it can be used to acquire additional investment properties. If you acquire additional investment properties you can apply the cost segregation method to those properties as well, creating a domino effect of freeing up cash to keep reinvesting.

If you’d rather have your money now than over a 27 or 39 year period then cost segregation is very likely a surefire way for you to be able to access your cash earlier than 95% of real estate investors.

Step 1 // Property consultation

Before we begin evaluating the details of your property we’ll run an Estimate Benefit to see if it makes sense to use the cost segregation method on your investment property. This shows us the projected accelerated depreciation and subsequent tax savings for the current tax year and the next 2 years.

With just 3 pieces of easily accessible information we can let you know just how significant the tax savings & freed up cash can be if you decide to apply the cost segregation method to your real estate investments.

Step 2 // Property On-Site Verification

This is the IRS-required stage where we visit your property, document your property’s components & gather supporting documents to help us understand exactly how your property has been built & improved.

Our mobile app captures & simplifies this on-site verification, creating a seamless process so that our engineering & tax team can review the verification that same day.

Step 3 // Construction Cost Estimation & Legal Analysis

Using IRS guidelines to defend your property’s cost segregation analysis & our real estate development experience of over 30 years, we determine what the cost to develop your property would be today, a process known as Reconstruction Cost New {RCN}.

After this RCN is determined, we use court cases, IRS regulations and audit procedures to leverage against the facts and circumstances of your property. This helps us determine which components of your property can be reclassified to shorter depreciation timeframes.

Ready to See your estimated cash available & tax savings?

How Can Entity Structuring Help my Business?

Determining the correct entity structure for your business can save you thousands of dollars in taxes if you set it up to optimize for the tax code. The Tax Cuts & Jobs Act of 2017 reduced U.S. corporate tax rates to a flat 21%, the lowest they’ve been in 80 years. But this only applies to C corporations and not the ever popular LLC structure.

Reduce as much as possible any tax liability and defer that liability for as long as possible. The C corporation has always been an optimal structure for many small businesses and professional practices. However, there are now new reasons for considering a C corporation structure.

Lowest corporate Tax Rate since 1939

Beginning in 2018 C corporate federal tax rates dropped to a flat 21%, the lowest they’ve been since 1939. So no matter how much income your C corporation generates it won’t be taxed more than 21% at the federal level.

This one aspect alone is good enough reason to consider using the C corporation as your chosen entity structure for your business. It just makes good business sense now to run the numbers and evaluate how your current entity structure measures up against the low tax C corporation.

We can help with those calculations to make sure all the factors are being considered so you have the right numbers to make an educated decision.

LLC IRS Compliance Campaign

On March 13, 2018 the IRS designated as a compliance campaign issue the underreporting of self-employment taxes by partners providing services to a partnership. This designation resulted in the IRS devoting an increased allocation of time and resources in auditing this issue which affects LLC members. Several recent court decisions have sided with the IRS in this area and because of the recent round of successful IRS efforts in the courts, along with the IRS's compliance campaign designation, we strongly urge all LLC taxpayer members to immediately reevaluate their reporting of self-employment income.

If you need help with how to do that we can work with you in assessing any risk you may be exposed to as a result of this compliance campaign.

Tax deferral Opportunities

Choosing your fiscal year end date is one of the most important decisions you’ll make when setting up your business structure. As a C corporation you have flexibility to choose your fiscal year end date which can be instrumental in allowing your business the opportunity to defer current tax liabilities.

When you set up a LLC or LLP the IRS automatically assigns your business a calendar year reporting method, which is why so many businesses close their books and end their year on 12/31.

However, choosing the correct year end date that takes into consideration the timing of your annual peak sales activity can defer your current tax liability by several months, allowing more time for your money to work harder for you.

If you’d like to know more about how this could work for your business we can help you evaluate the optimal fiscal year end date for your business.

Income Splitting

Setting up your business as a C corporation allows you to income split as it is appropriate. The idea behind this is to reach an optimal tax balance between your business & your personal tax situation so that your business & personal tax rates are equivalent or close to equivalent.

Splitting your income between your business and your personal entities allows you flexibility that is not available with LLCs and other entity forms.

Ready to see the projected tax savings for your business?

Retirement Plans for Professional Practices & Small Business Owners

A high owner contribution, IRS approved, fully tax-deductible accelerated retirement plan

who Is this plan for?

• Profitable small business owners, partnerships & professional practices

• Businesses with 1-10 employees

• Owners who want to make larger tax-deductible contributions than currently allowed in a SEP-IRA or 401(k) plan

• Businesses with cash flow that will allow owners to make consistent contributions for the next 5 or 10 years

• Dental & medical practices, family businesses, franchisees

What exactly is this plan?

• An IRS-approved Cash Balance plan with a Safe Harbor 401(k)/Profit Sharing Plan. Combining these 2 plans potentially provides for the highest allowable contributions for owners (currently up to $200,000 for owners)

• Contributions for owners often exceed 90% of the total contribution amount

• Employee contribution costs are controlled while still passing all compliance testing

• All contributions are fully tax-deductible

• Investments grow tax-deferred

• You and your financial advisor choose the right investments for you

• Upon retirement or plan termination balances can be rolled into an IRA where they continue to grow tax-deferred until withdrawal

How does it help me?

• You may be able to accumulate $1 Million - $2.6 Million in 5-10 years

• Family businesses can use high contributions for senior members as part of estate and succession plans

• Older owners of highly profitable small businesses can catch up on retirement savings

• Business owners who have outgrown SEP or SIMPLE plans can contribute more for themselves without increasing employee contributions

• Reduces income to allow certain pass-through entities to take potentially up to 20% deduction on qualified business income

Want to See how Quickly You can Accelerate your Retirement Savings?