As a follow-up to my webinar on November 20, the final tangible asset regulations were passed by the IRS in September. As discussed, we all have probably heard about the concept of a cost segregation study (CSS). The typical CSS that we are familiar with identifies and carves out the “personal” property. This allows us to depreciate those assets over a shorter life. However, the new tangible asset regulations have changed the methodology of a cost segregation study. An engineer-based study will not only analyze the “personal” property but also the “real” property. This will help us identify the assets for future dispositions, remodeling, and a potential deduction for certain expenditures.
Please note that your original CSS does not need to be changed. It can, however, be modified to include additional information regarding the “real” property.
New Tangible Regulations
The following are the types of studies that can be performed to utilize the new tangible regulations:
- Cost Segregation - an analysis of all building construction and improvement costs that properly classifies the costs into the correct recovery periods for depreciation purposes. It generates a time-value-of-money benefit for taxpayers.
- Asset Management - this is a cost segregation study with a greater level of pricing detail, particularly with the 27.5/39-year assets (a.k.a. real property). The purpose for this detail is to assist taxpayers in writing down the remaining cost basis of assets being replaced or retired. It will identify the assets for future dispositions and remodeling.
- UoP - Unit of Property is a newly created term for the repair versus capital regulations. It is a required process that allows a taxpayer to determine if an expenditure at a property is required to be capitalized or can be expensed. The UoP details the cost of a building’s nine main components. This list tracks the cost changes over time within each of these nine areas.
- ReCap - this is a type of study that provides cost detail beyond that of standard cost segregation with the express purpose of defining the cost of assets that have been replaced in the past so that the taxpayer can expense their remaining cost basis. It also provides a review of past history for assets that have been capitalized which could have been expensed.
Do not lose out on these accelerated deductions for your 2013 tax return. Individual tax rates have increased and the affordable healthcare surtaxes are applicable. Help alleviate your tax bill come April 15 by utilizing one of the above studies. For more information, please contact me at firstname.lastname@example.org.
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