If you own property in Utah that has been recently built, renovated, or purchased, you can take advantage of a Cost Segregation study. Cost Segregation can help to significantly improve cash flow and also help to defer tax.
What is Cost Segregation in Utah?
A Cost Segregation study in Utah is an IRS-recognized tax benefit strategy that can accelerate the depreciation of 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 estate property).
Key Aspects of a Cost Segregation Study:
- Free up capital by accelerating the depreciation of personal property (§ 1245) and Qualified Improvement Property (QIP) as well as identifying various expensing opportunities associated with 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 Utah Buildings
Utah buildings qualify for a Cost Segregation study if they meet the following requirements:
The property owner must be a tax-paying entity
Placed-in-service since 1987 (most studies are limited to the last 5 to 7 years)
Currently depreciating over 27.5 or 39 years
Have been acquired, constructed, expanded, or remodeled
$500,000+ in capitalized costs is a good starting point to begin thinking of Cost Segregation
What Documentation Is Needed For a Utah Cost Segregation Study Estimate?
To receive a Utah 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 It Works
Utah Cost Segregation is a highly specialized field. Our expert Cost Segregation team provides services that are designed to exceed the IRS’ Cost Segregation Audit Techniques Guide’s Chapter 4-Principal Elements of a Quality Cost Segregation Study and Report.
Every basic Cost Segregation service includes the following:
Pre-qualification and Proposal
This involves a detailed pre-qualification process where the scope of work is defined and an estimate of benefits is generated. Additionally, a flat fee quote is presented with the estimate of benefits.
Request and Gather Data
After the proposal is signed, our team collects and analyzes any information provided by you. This often includes construction drawings, change orders, invoices, and depreciation schedules.
Perform Site Visit and Study
After reviewing the materials provided, our team will work to identify any Utah 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 studies and therefore, we review each study a minimum of three times.
Finalize the Report
When finalizing the report, we first issue a draft report. Discussions are held with the taxpayer and their CPA to verify Source Advisors’ assumptions and findings. Once all questions have been addressed and adjustments made to the report, the final report is issued.
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 Utah Cost Segregation Studies
There are a number of benefits associated with Cost Segregation studies for property owners in Utah:
- 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
Buildings In Utah That Can Benefit
A significant number of buildings in the state of Utah can benefit from Cost Segregation studies, 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 Utah Cost Segregation Study Be Conducted?
A Utah 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).
Get help with your Utah Cost Segregation study today.
Types of Cost Segregation Studies Available in Utah
The following Cost Segregation studies are available in Utah:
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 Utah 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?
Utah 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 assists 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 Utah Cost Segregation study.
Cost Segregation with Source Advisors
Detailed Cost Segregation studies by the experts to maximize depreciation.
