Did you know that Depreciation is like a classic American Baseball Game?

You must hit all the bases to score a home run for the best ROI on your depreciation. Do you know the rules? 

Think about how many people you know who buy commercial buildings or investment properties. Properties change hands every day, regardless of age. If you have a building, no matter its age or condition, get a cost segregation study done. It will benefit you now and even more in the future. Here’s how:

First Base: Conduct a cost segregation study to take advantage of accelerated depreciation and reduce your tax liability. This means keeping more money in your pocket instead of giving it to the government. Who wants to overpay the government when you can keep your money in your own bank account? 

Second Base: Plan a renovation of your building or investment property. After the renovation, we’ll perform another cost segregation study. This allows you to take advantage of the depreciation on the renovation, keeping even more money in your pocket. 

Third Base: After the renovation, conduct a disposal study. This can only be done if you’ve already hit first and second base. The disposal study identifies all the retired components and calculates the depreciation left on them when they were discarded. 

We’ve seen clients buy a building, such as a $3 million property, and do a cost segregation study, producing benefits ranging from $200,000 to $450,000, depending on factors like structure and bonus depreciation. When they do a major renovation, they can further benefit from retiring components with depreciation left on them. We’ve seen disposal studies yield over $1 million in extra depreciation from retired components within the current tax year.

Note that a renovation and disposal study cannot be done in the same tax year as a cost segregation study for a newly purchased building. Components must have been used for a time to have value in the eyes of the IRS. You can’t buy a building, discard components immediately, and claim they had value. Many miss first base and are out at third when they can’t do a disposal study. Round all three bases correctly to maximize your depreciation benefits and ROI.

If you’d like to learn more and get a FREE preliminary proposal on your building or investment property, we’re here to help.