|
Would
you like to get more money out of your income-generating properties without any
work or risk? A highly underused IRS approved accelerated depreciation strategy
can give you instant Tax deductions that may mean hundreds of thousands of dollars
to you in the first two years alone, and improve your cash flow instantly. No
matter what kind of building you have - Apartment, Retail Store, Restaurant, Hotel,
Storage or Manufacturing, 20-40% of the whole building can be reclassified as
Personal Property and can be depreciated in 5-15 years instead of 27.5 or 39 years.
By doing so, you will get depreciation credits of hundreds of thousands of dollars.
All you have
to do is use the IRS guidelines and take an "engineering-based approach"
to identifying assets within a building that can be reclassified into a much shorter
depreciation class than the building itself. This under utilized approach allows
taxpayers to increase cash flow by accelerating depreciation expenses and deferring
federal and state income taxes. Residential real estate properties are generally
depreciated over 27.5 years and commercial real estate properties are generally
depreciated over 39 years using a straight-line method for tax purposes. However,
non-structural components of a building can be "carved-out" and depreciated
over a much shorter time period. Building components such as carpeting, decorative
finish, fixtures, etc. can be depreciated over 5 or 7 years. Land improvements
such as parking lots, sidewalks and landscaping can be depreciated over 15 years.
As much as 35% of a building's components can be separated and reclassified into
a shorter recovery period. Whether your property is under construction, being
remodeled, or purchased, there are valuable tax deductions hidden in your property.
Consider a typical
apartment complex purchased for $5 million dollars, assuming that 20% of the cost
of the building was improperly classified as real property (27.5-year) instead
of personal property (7-year). By moving the 20% improperly classified as 27.5-year
property to 7-year property, the estimated After-Tax Present Value Benefit of
the entire project can be as much as $160,000. In this example, owner's tax savings
could be as much as $72,000 for the 1st year, $113,000 for the 2nd year, $62,000
for the 3rd year, and $30,000 for the 4th and 5th year. This is the example of
your potential Tax Savings. This
approach is totally IRS approved because they wrote the guidelines, and this approach
can be used on many different types of properties. Typical percentages of the
whole building cost that can be classified as personal property or land improvements
rather than real property is; 20-45% for Restaurant and Manufacturing, 10-35%
for Office Building, 15-45% for Retail Space and 20-30% for Apartment Building.
All properties that have been constructed, purchased or renovated since 1987 qualify
for this tax benefit. If you answer "yes" to the following questions
then this approach to changing your depreciation will be a valuable tax benefit
for you.
1) Is the cost of your building at least $750,000?
2) Have
you purchased, constructed or renovated since 1987?
3) Do you plan on retaining
the property for the next few years?
4) Do you have net income that is being
taxed?
For those that have built or purchased buildings or facilities in
the past and have not taken advantage of this approach may still benefit from
the correction of missed depreciation in past years. The IRS now allows the benefits
to be recognized in the current year, without filing an amended return - this
means that when you follow the IRS guidelines, and since you don't have to file
an amended return, it's totally IRS approved and does NOT trigger an audit. The
IRS established these guidelines and "rules" via a US Tax Court decision
in 1997. Recently the IRS has continued to validate, uphold and improve the value
of these guidelines by enacting the 2002 and 2003 Tax Acts. You
may be wondering "why hasn't my CPA or tax preparer told me about this?"
First, they may not realize that this approach exists. Second, it's much easier
for them to file a simple straight-line depreciation schedule and be done with
it. Finally, they likely don't have the expertise to handle following the guidelines
and "rules" the IRS has set forth in order to take advantage of this
approach. For
more information and free evaluation of your tax benefit, contact Tracy Taguchi
at (310) 800-6333 
| |
