Resource Library

Cost Segregation

Person drawing plans. A case study in cost segregation.

 

Client acquired and remodeled a building to rent out to their business. 

Unless the taxpayer has other rental properties that generate taxable income, new rental properties often generate tax losses that are disallowed. However in this case, since the building was being rented to their business, the IRS allows the taxpayer to aggregate the business activities. 

This means that all losses from the building are fully deductible. Since the rental losses are fully deductible, RINA recommended a cost segregation study to maximize the losses generated from the rental property. A cost segregation study allocates the purchase price and remodel of the building to the various components that have shorter depreciable lives. 

The additional depreciation generated from the cost segregation study was in excess of $200,000, saving the client over $80,000 in tax.

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