Tax Benefits of Section 1031 Like-Kind Exchanges
With real estate prices up in some markets, the “like-kind” exchange strategy may be attractive if you want to sell commercial or investment real estate.
Do you own depreciable property, plan to purchase or construct real property, or make leasehold improvements to your existing facilities? If so, you may benefit from significant tax savings. Cost segregation is an effective tax savings strategy which allows for the reclassification of certain property, such as commercial or residential buildings, for shorter depreciation periods. Shorter depreciation periods accelerate deductions, resulting in reduced current taxable income and increased cash flow.
Benefits of a cost segregation study include increased depreciation in earlier years, increased cash flow, and future write-offs when structural components are replaced.
Lumsden McCormick’s cost segregation specialists work closely with individuals who have constructed, purchased, remodeled, or expanded property to achieve tax savings. We begin by conducting a risk analysis and then move on to identify construction-related costs that can be depreciated over shorter periods than the related building. These items usually include nonstructural elements that are affixed to the building such as carpets, wall coverings, lighting, and portions of the electrical and heating systems, as well as exterior improvements such as sidewalks and landscaping.
Depending on your particular circumstances, 25 percent or more of the cost of your building may be reclassified, resulting in significant present value savings.
For more information about cost segregations services from Lumsden McCormick, contact a Lumsden McCormick service leader or complete the information below.