Cost Segregation Planning in a Time of Uncertainty

August 2017 | Article

Have you ever wanted to turn a timing item into something that resulted in permanent savings? If so, now could be your chance.

With the potential reduction in tax rates through reform, timing differences such as accelerating depreciation deductions through cost segregation studies could have a permanent impact on your tax liability. This means that if you’ve ever considered a cost segregation study on your real estate assets, now could be the best time to move forward. Rate changes have the unique ability to change timing items into permanent differentials and missing the opportunity to monopolize on these benefits would be quite unfortunate.

Let’s look at the math: Assuming you accelerate $1,000 of depreciation deductions into 2017 when your tax rate is 35 percent, a tax savings of $350 would be generated. If you were to wait until 2018 and your tax rate drops to 25 perecnt, the same exact amount of accelerated deductions would be worth only $250 instead of $350—permanently losing you $100 of tax benefit.

With such uncertainty in the future tax environment, one thing is for certain: deductions are available currently and cash today is better than cash tomorrow. Even if Congress doesn’t act, that doesn’t mean you have to miss out. 

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