Cost Segregation Services in Massachusetts

Find out if you qualify for Massachusetts Cost Segregation to increase your tax savings and maximize depreciation.

If you own residential rental property in Massachusetts that has been recently built, renovated, or purchased, you can take advantage of a Cost Segregation study. Cost Segregation can help significantly improve cash flow and also help to defer tax.

What is Cost Segregation in Massachusetts?

A Cost Segregation study in Massachusetts is an IRS-recognized tax benefit strategy that can accelerate the depreciation of commercial properties during the early years of building ownership, ultimately freeing up capital. During a study, specific components of a building or improvement project are identified that can be treated as personal property or land improvements for Federal tax purposes (rather than real \property).

Key Aspects of a Cost Segregation Study:

  • Free up capital by accelerating the depreciation of personal property (§ 1245), land improvement, Qualified Improvement Property (QIP), in the case of real estate. The accelerated time frame is typically 5, 7, and 15 years rather than 27.5 or 39 years for the building (§ 1250)

Owners of residential rental properties who take advantage of Cost Segregation studies can utilize the tax savings to potentially purchase additional properties, reduce current debt, and ultimately continue to grow their business.

Eligibility: Cost Segregation Studies for Massachusetts Buildings

Massachusetts buildings qualify for a Cost Segregation study if they meet the following two requirements:

Acquired after December 31, 1986

Has a cost basis of at least $150,000

What Documentation Is Needed For a Massachusetts Cost Segregation Study Estimate?

To receive a Massachusetts Cost Segregation study estimate, you’ll need to provide (at minimum):

Brief description of your business

Property address

Total square footage of the building site

Number of floors

Capitalized costs for your project

Years that it was capitalized in

Depreciation schedule (in the case of properties owned for more than one year)

How Does Cost Segregation Work in Massachusetts?

Our Cost Segregation studies are designed to exceed the IRS’ Cost Segregation Audit Techniques Guide’s Chapter 4-Principal Elements of a Quality Cost Segregation Study and Report.

Each Cost Segregation study includes the following stages:

Pre-qualification and Proposal

During the first stage, we’ll outline the scope of work and generate an estimate of benefits. A flat fee quote is also included.

Request and Gather Data

Once the above proposal is signed, the Source Advisors team will analyze any of the information provided by you (construction drawings, depreciation schedules, change orders, and invoices).

Perform Site Visit and Study

After reviewing the materials provided, our team will work to identify any Massachusetts properties that might be reclassified. In the likely event that an invoice detail is insufficient for the entire study, we will augment the invoices with detailed estimates derived from the construction drawings and site visit of the property. The results will be presented in a report that includes our methodology, relevant case law, definitions, property description, photos, and detailed schedules of our calculations.

Review

We value accuracy and quality in our Cost Segregation studies. We review each study a minimum of three times.

Finalize the Report

A draft will initially be created and provided to you for review before the report is finalized.

Discussions are held with the taxpayer and their CPA to verify Source Advisors’ assumptions and findings. The final report is issued after any and all questions/adjustments are addressed.

Audit Support

Source Advisors’ highly experienced management team provides audit support through appeals in the event that a study is reviewed in audit.

Benefits of Massachusetts Cost Segregation Studies

There are a number of benefits associated with Cost Segregation studies for property owners in Massachusetts:

 

  • Significantly Improved Cash Flow: This can be generated in earlier years for your property.
  • Reduction of estimated quarterly tax payment
  • Property tax savings
  • Net Present Value (NPV): Net present value (NPV) of receiving depreciation expense deductions earlier rather than prorated over the life of the property
  • Opportunity to Reclaim Depreciation Deductions: A lookback study could correct your depreciation schedule going forward and generate a catch-up in missed depreciation (§ 481(a) adjustment)
  • Transfer tax savings

Which Buildings Can Benefit?

There are many buildings that can benefit from Cost Segregation studies in Massachusetts, including:

 

  • Multi-Family Units
  • Apartments
  • Hotels
  • Banks
  • Office Buildings
  • Healthcare Facilities
  • Warehouses
  • Distribution Centers
  • Nursing Homes
  • Restaurants
  • Sports Facilities
  • Shopping Centers
  • Retail
  • Grocery Stores
  • Plus many more

Ready to increase your short-term cash flow?

When Should a Massachusetts Cost Segregation Study Be Conducted?

 

A Massachusetts Cost Segregation study should be conducted in either:

  • The year you are purchasing the property
  • The year you are remodeling the property or,
  • The year you are constructing the property

If your property is outside of these aforementioned time periods, there is the possibility of a lookback study being conducted. If performed, this would correct your depreciation schedule going forward and generate a catch-up in missed depreciation (§ 481(a) adjustment) without the need to amend tax returns.

Get help with your Massachusetts Cost Segregation study today.

Types of Cost Segregation Studies Available in Massachusetts

The following Cost Segregation studies are available in Massachusetts:

Cost Segregation Standard Study:

Identifies §1245 Property (5, 7, & 15-year property (Typ.)). Includes: §1250 Qualified Leasehold Improvements, Qualified Retail Improvements, & Qualified Restaurant Improvements (15-year straight-line property), as well as §1250 Qualified Improvement Property (15-year straight-line property and bonus depreciation for §1250 interior improvements after 12/31/2017). Enhanced Cost Segregation: Identifies units of property, building systems, and major components. Stop short of componentizing the 1250 building components. The level of detail within this study is highly customizable depending on the type of property as well as the property owner’s tax strategy and future Tangible Property Regulations needs.

Disposition Study

This is a current year study only. Included is a detailed analysis of existing assets removed from service in the current tax year for the purpose of creating a disposition deduction. It also includes both §1245 and §1250 assets.

Fixed Asset Review

Fixed asset reviews allow companies to correct past depreciation schedules and maximize depreciation expense deductions, achieving compliance and setting a precedent for managing depreciation schedules going forward. While fixed asset reviews are not a new concept, the opportunities afforded to taxpayers by the Tangible Property Regulations, PATH Act, Tax Cuts and Jobs Act, and CARES Act are highly complex and difficult to apply. A Source Advisors Fixed Asset Review is a detailed review of a taxpayer’s depreciation schedule that might include one or a combination of the following: Cost Segregation opportunities, Repair opportunities or risks, §1245 property improperly capitalized (or bonus incorrectly applied), Full Asset Dispositions, Partial Asset Dispositions, Opportunities to apply bonus depreciation, Opportunities to apply for qualified leasehold, restaurant and retail improvements for year placed in service prior to 2018, Qualified Improvement Property (QIP) for years placed in service after 2015, and Qualified Real Property (QRP) for years placed in service after 2017.

§179D Study

If your company owns or leases buildings, and you have built, installed, or retrofitted the property to be more energy efficient, you may be eligible to deduct all or part of the costs associated with the construction, installation, or retrofit.

The Energy-Efficient Building Tax Deduction, or §179D, provides a tax deduction of up to $1.80 per square foot for the installation of systems that reduce the total energy and power costs by 50 percent or more when compared to an ASHRAE standard reference building.

§45L Study

Energy-efficiency study for residential housing. A tax credit (up to $2,000 per dwelling) that offers developers a means to offset the costs associated with building energy-efficient single-family or multifamily properties. The credit provides a dollar-for-dollar offset against taxes owed or paid in the tax year in which the property is sold or leased.

Depending on the Massachusetts Cost Segregation study you select, it typically takes 30 to 45 days to complete.

What is the Cost of a Study?

The IRS specifies the cost of Cost Segregation should be based on the time required to perform the study; not a percentage of the projected or realized savings. The time involved in a study is driven by multiple factors (including, but not limited to):

How big is the building?

What is the business activity in the building?

How many tax years will be analyzed?

Massachusetts Cost Segregation From the Experts: Source Advisors

Source Advisors is a specialized tax consulting firm providing Cost Segregation, R&D Tax Credit, Energy Efficiency (§179D), and LIFO inventory solutions for more than 37 years.

Our team of experienced CPAs, attorneys, engineers, technology experts, and Big Four professionals help companies save money and create cash flow to stimulate businesses and drive overall growth. We are experts in the legislation that governs these incentives and assist CPA firms and companies navigate the laws that continue to evolve and change.

The majority of Source Advisors’ team of architects, professional engineers, CPAs, MBAs, and LEED-certified professionals have spent between 10 and 20+ years managing Cost Segregation services. Each cost segregation specialist is highly trained in working with clients, gathering the necessary data, and analyzing each building to assure that we identify the maximum benefit that each taxpayer is entitled to receive.

Find out if you qualify for a Massachusetts Cost Segregation study.

Cost Segregation with Source Advisors

Detailed Cost Segregation studies by the experts to maximize depreciation.