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A Tax Strategy Goldmine for Investors who Filed Extensions

Apr 02, 2024

     April 15th has rolled by, and perhaps you're among the savvy investors who've filed for tax extensions, not just out of procrastination but as a strategic move. You're in the relentless pursuit of maximizing every tax deduction, ensuring you pay the minimal amount in federal income taxes. Rest assured, you're in good company.

     For those with an eye for opportunity and a desire to bolster their financial efficiency, there's a irresistible option that might not have crossed your radar: a Cost Segregation Study. Yes, whether you're the proud owner of a quaint residential rental or a sprawling commercial complex, the window to leverage cost segregation for your 2023 federal income taxes hasn't closed yet. And here's a nugget of gold for you: This opportunity isn't just for new acquisitions. Even if you've been holding onto a property for a decade, there's potential gold to be mined through cost segregation.

     To bring this strategy to life, your CPA would complete the IRS Form 3115, allowing you to capture depreciation benefits in this year's tax filings. It's simpler than you think, especially with the right expertise by your side.

     Let's dissect a couple of success stories to illuminate how transformative cost segregation can be for your bottom line.

Case 1: The Office Building Miracle

     Imagine owning an office building with a valuation of $1.4 million. Through the magic of cost segregation, a substantial 32% of this value qualified for immediate write-off, translating to a whopping $458,576.84. For the investor, nestled comfortably in the 37% tax bracket, this strategic move injected an extra $169,673.43 into their business's cash flow. Money that would have otherwise filled IRS coffers was now fueling business growth and investment opportunities.

Case 2: The Strip Mall Windfall

     Consider a strip mall priced at $4.917 million. With cost segregation, 30% of the property's cost became an instant tax deduction, amounting to an impressive $1,193,243. For our investor, this brought in an additional $441,503 in cash flow during the first year alone. Again, funds that were destined for tax payments were now bolstering the investor's war chest.

Why Cost Segregation?

     Cost segregation isn't just a tax strategy; it's a testament to financial savvy. It enhances cash flow, reduces tax liability, and accelerates depreciation deductions. By reclassifying property components and improvements, cost segregation enables substantial upfront deductions. The beauty of this strategy lies in its ability to adapt to properties old and new, ensuring that investors can continually optimize their tax positions.

Making the Move

     Don't let another tax year pass by without harnessing the power of cost segregation. Your portfolio, and your future self, will thank you.

Contact us to see if COST SEGREGATION is a good fit for your business.

Free 15 minute call to see if you qualify.

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