www.marejournal.com
12C — June 23 - July 13, 2017 — Mid-Year Review — M id A tlantic
Real Estate Journal
T axes
By Terri S. Johnson, Capstan Tax Strategies Summertime is the Right Time: Creating a Comprehensive and Thoughtful Tax Plan
S chool is out. The sun is shining. It’s time to think of cold drinks,
sive and thoughtful tax plan, ensuring that no possible op- portunity is overlooked. As you take stock of your situation, know that you may be able to maximize savings on your commercial real es- tate using IRS-approved engi- neering-based tax strategies. The following are just some of the ways a cost segregation study can free up cash flow: 1. Cost segregation acceler- ates depreciation deductions by shifting building compo- nents into shorter class-lives, resulting in increased cash flow and a decreased tax
burden. 2. The Tangible Property Regulations (TPRs) clearly delineate which costs must be capitalized, and which may be expensed. 3. TPR guidelines also allow the remaining depreciable ba- sis of replaced or demolished assets to be expensed using a Partial Asset Disposition (PAD) election. 4. The PATH Act of 2015 has further extended the util- ity of cost segregation, extend- ing Bonus Depreciation for a whopping five years, through the end of 2019. Bonus Depre-
ciation will be permitted at a rate of 50% for Tax Year 2017. 5. The PATHAct also estab- lished Qualified Improvement Property (QIP), a broadly- defined category of property improvements that expands the availability of this lucra- tive Bonus Depreciation. These strategies are very powerful, and may apply to your property at any stage of its life cycle. To ensure that you are optimizing tax sav- ings on your most lucrative of fixed assets, consider the following: Have you constructed or
acquired a new property? • Was a cost segregation study performed to begin maximizing deductions from year one? • Was a Unit of Property study performed simultane- ously, to create an accurate and complete breakdown of assets useful for capturing further deductions? Have you renovated or improved any previously acquired property? • Was a PAD Analysis per- formed to dispose of the re- maining cost basis of assets retired, replaced, or demol- ished? • Can any improvements be classified as QIP and there- fore be Bonus-eligible? Has all spend been catego- rized correctly using the TPR guidelines? Have the BAR and Materiality tests been performed to identify and reclassify current any assets that were capitalized but are actually expensable under the TPRs? Have you maximized your expensing using the Safe Harbors established by the TPRs? • RoutineMaintenance Safe Harbor is a powerful election for all property owners and the Safe Harbor for Small Taxpayers is an extra election for the smaller property. • The De Minimus Safe Harbor is an excellent source of deductions for taxpayers with an Applicable Financial Statement (AFS) at $5000 per item, and was recently raised to $2500 per item for non-AFS taxpayers as well. Are you considering reno- vation of your property in the near future? • Consider performing stud- ies now, in order to document and breakdown assets that could be written off post-reno- vation through PAD elections. • Keep in mind that future improvements may be simul- taneously classified as QIP and QLI/QRIP as long as all qualifications are met. This double classification would allow for spend to be both bonus-eligible and a 15-year life. Are you considering new construction? Keep the powerful Bonus Depreciation incentives established by the PATH Act in the back of your mind. Clearly, there is a great continued on page 20C
b a c k y a r d barbeques, and , we l l , t a x e s . I t may s e em strange to think about next year’s tax season during these
Terri S. Johnson
lazy, hazy, possibly crazy days of summer, but this is the perfect time to pause and self-assess. Planning ahead is the key to a comprehen-
CAPSTAN our strength. your tax savings.
You know how to close a deal.
Capstan knows how to accelerate depreciation and maximize tax savings. Expertise in Tangible Property Regulations. A proven track record in Cost Segregation Studies. A true partner to the commercial real estate industry.
We’ll shake on that.
215-885-7510 capstantax.com
Made with FlippingBook Online newsletter