12D — January 25 - February 7, 2019 — 2019 Forecast — M id A tlantic
Real Estate Journal
www.marejournal.com
T axes
By Terri S. Johnson, CRE, Capstan Tax Strategies The Big Questions: Maximizing Tax Savings in 2018
T
he Tax Cuts and Jobs Act has generated a great deal of oppor-
is overlooked, you might con- sider the following: Did you build/acquire any commercial real estate in 2018? • If so, was a cost segrega- tion study performed to begin maximizing deductions from year one? The 100% Bonus depreciation provision of the TCJA makes this especially useful for both newly con- structed and acquired prop- erties. • Was a Unit of Property study performed simultane- ously, to create an accurate and complete breakdown of
assets useful for capturing further deductions? Did you acquire any real es- tate in the last several years? • Did you decide a cost segregation study wasn’t “worth it” for such a small property? Consider revisiting that assessment, as certain TCJA provisions have made smaller-basis properties more viable candidates for study. Look-back studies may be performed, allowing you to “catch-up” onmissed deprecia- tion in year one. • Did you decide a cost seg- regation study wasn’t “worth
it” since Bonus depreciation didn’t apply to acquisitions? Under the TCJA acquisitions acquired on or after 9/28/17 are NOW eligible for Bonus depreciation, and many cli- ents are opting to have a study performed. Did you renovate or improve any previously acquired prop- erty? • Was a Partial Asset Dis- position (PAD) Analysis per- formed to dispose of the re- maining cost basis of assets retired, replaced, or demol- ished? Has all spend been catego-
rized correctly? • Have the BAR and Mate- riality tests been performed to identify and reclassify any assets that were capitalized but are actually expensable under the Tangible Property Regulations? Have you maximized your expensing? • New this year – the TCJA permits expensing of certain building improvements under Section 179, including roofs, HVAC, security systems, and more. • Safe Harbor expensing opportunities under the TPRs are also still in play. o Routine Maintenance Safe Harbor is applicable across the board. o Safe Harbor for Small Taxpayers is an extra election. o The De Minimus Safe Harbor, always an excellent source of deductions for AFS taxpayers, was strengthened for non-AFS taxpayers as well. Are you planning renova- tions in the near future? • Consider a cost segrega- tion study now, in order to document and breakdown as- sets that could be written off post-renovation through PAD elections. • Determine your date of construction and service date to take advantage of 100% Bonus depreciation. After 12/31/2022 the Bonus de- preciation rate will begin to decline each year. Did you engage in any like- kind exchanges? • Under the TCJA, the combination of cost segrega- tion and a 1031 exchange has become an even more impor- tant tax strategy. Keep in mind that effective 1/1/2018, only real estate like-kind ex- changes are permissible. Clearly, there are a number of deduction opportunities available to the commercial real estate owner, with a myriad of associated tax strat- egies. The best way to make sure that you’re making the most of your fixed assets is to partner with experts like your CPA and the Capstan team. Terri S. Johnson, CRE is a co-founder and partner at Capstan Tax Strategies. Terri works closely with commercial real estate owners and accounting firms to provide practical, creative, and customized engineering-based tax solutions.
t un i t y f o r commercial real estate owners, but t h e T C J A i s n ’ t t h e only game in town. There are tax sav- ings strate-
Terri S. Johnson
gies old and new in play for 2018; thoughtful and com- prehensive tax planning is more important than ever. To ensure that no opportunity
CAPSTAN our strength. your tax savings.
Tax Savings Maximizers Subject Matter Experts Your Trusted Partners
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