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Tangible property regulation studies involve a detailed analysis of a property’s assets to classify expenditures as either repairs and maintenance (deductible expenses) or capital improvements (depreciated over time). The IRS issued final tangible property regulations in 2013, providing clear guidelines for how property owners should handle expenditures on acquisitions, repairs, and improvements.
For multi-family properties, which often involve frequent repairs and upgrades, these studies are instrumental in identifying immediate deductions that would otherwise go unnoticed.
A TPR study provides a comprehensive inventory of a property’s components and their respective values. This allows owners to make informed decisions about when to repair, replace, or dispose of assets.
Engage a Qualified Tax Professional Â
Work with a tax professional experienced in tangible property regulations and real estate. They will have the expertise to identify and document eligible deductions properly.
Conduct a Detailed Asset Review
A thorough review of the property’s assets and past expenditures is essential. This includes analyzing repair and maintenance records, improvement projects, and replacement schedules.
Classify Expenditures
Use the IRS tangible property regulation guidelines to classify expenses into deductible repairs, capital improvements, or partial asset dispositions.Â
Prepare and File Adjustments
If necessary, file Form 3115 (Application for Change in Accounting Method) to adopt the appropriate accounting treatment for tangible property expenditures retroactively.
Establish Ongoing Processes
Implement systems to track and classify future expenditures accurately, ensuring ongoing compliance and optimization of tax benefits.
For multi-family property owners, tangible property regulation studies are not just an option—they are an essential tool for maximizing tax efficiency. These studies provide immediate tax savings, improve cash flow, and ensure compliance with IRS regulations. By engaging qualified professionals and conducting detailed asset reviews, property owners can unlock significant financial benefits, allowing them to reinvest in their properties and achieve long-term success in the competitive real estate market.
If you own a multi-family property and haven’t explored the advantages of TPR studies, now is the time to act. The savings and strategic insights gained from these studies can make a meaningful impact on your bottom line.