Cost segregation lowers your federal income tax. Your state and local property and transfer taxes need a separate strategy, set before closing. RealAdvice® helps commercial real estate buyers pay only the taxes that they legally owe by separating non-taxable intangible value from taxable real estate at closing.
Cost segregation is a federal income tax strategy that speeds up depreciation on a building you own. A cost segregation study identifies parts of a property, such as certain fixtures, finishes, and site improvements, that can be depreciated faster than the building itself. Residential rental buildings are otherwise depreciated over 27.5 years and nonresidential buildings over 39 years.
Faster depreciation brings deductions forward and lowers federal taxable income in the early years of ownership. It doesn’t change the property’s value, its assessed value, or your state and local taxes.
No. Property and transfer taxes are set under state and local law, so a cost segregation study has no effect on them. In many states, the price you record at closing becomes the starting point for your property tax assessment. In states with a transfer tax, that same price sets what’s due when the deed records.
The price of an operating property often includes intangible value, such as in-place leases and the business itself, that most states don’t tax as real estate. Separating that value takes a state-law valuation completed before closing.
Yes. The two strategies reduce different taxes and don’t conflict. RealAdvice’s work happens before closing, and a cost segregation study usually follows the purchase. Your CPA or cost segregation provider handles the federal side, and our report stays restricted to state and local tax.
The Florida Department of Revenue approved our methodology in 1991. Courts upheld it in the Disney rulings in 2018 and 2020, and it was vetted in federal bankruptcy court in 2022.
TRANSACTION CONSIDERATION ANALYZED
IN FIRST YEAR TAX SAVINGS FOR CLIENTS
STATES WHERE CLIENTS CAN BENEFIT
No. RealAdvice works only on state and local taxes: the property and transfer taxes tied to a commercial purchase. Our report is restricted to state and local tax use.
No. The ProperTax Appraisal is restricted to state and local tax use. It does not change your federal tax basis or your lender’s appraisal.
At the letter of intent (LOI) or offering memmoradum (OM) stage, or before the purchase and sale agreement (PSA) is signed. Our report is typically issued about ten days before closing.