Rental Property Cost Segregation

Cost Segregation is a commonly used strategic tax planning tool that allows building owners who have constructed, purchased, expanded or remodeled real estate to increase cash flow by accelerating depreciation deductions and deferring federal and state income taxes.

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Benefits with us

Accelerate Depreciation Deductions

The primary goal of Cost Segregation is to identify all property-related costs that can be depreciated faster (typically over 5, 7 and 15 years).

What It Is

Cost Segregation is a commonly used strategic tax planning tool that allows building owners who have constructed, purchased, expanded or remodeled real estate to increase cash flow by accelerating depreciation deductions and deferring federal and state income taxes.

A Cost Segregation report for residential investment property dissects the purchase price of the property that would otherwise be depreciated over 27.5 years for income tax purposes.

Retirement & Partial Disposition Deductions

The secondary goal of Cost Segregation is to establish the depreciable tax value for each major building component that is likely to be replaced in the future. Examples include roof, windows, doors, bathroom fixtures, HVAC, etc. When a component is replaced, taxpayers need this information to claim a “retirement loss” or “partial disposition” deduction for its remaining depreciation.

Most frequent questions and answers

Cost Segregation is a commonly used strategic tax planning tool that allows building owners who have constructed, purchased, expanded or remodeled real estate to increase cash flow by accelerating depreciation deductions and deferring federal and state income taxes.

A Cost Segregation report for residential investment property dissects the purchase price of the property that would otherwise be depreciated over 27.5 years for income tax purposes.

General building information including, but not limited to the square footage, number of rooms, and location is needed as well as specific property features such as flooring, appliances, and parking spaces.

Most Cost Segregation studies are performed by experienced engineers who are familiar with building construction and extensive tax law related to depreciation and typically cost thousands of dollars. Tax preparers generally do not have the skill sets needed to conduct a study and the experience of our in-house tax and engineering team to ensure your report will maximize benefits and stand up to IRS audit scrutiny.

A Cost Segregation report is only as good as the people standing behind its findings. Palma Financial Services, Inc. employs one of the largest teams of Cost Segregation engineers in the US. However, in the event of an IRS audit, Palma Financial Services, Inc. will provide free audit support time at no additional charge for issues directly related to our report.

  • Summary of tax benefits and additional deductions generated from Cost Segregation.
  • Detailed schedule of the building’s major costs organized by tax category (used to complete your tax return).
  • Excel export in depreciation schedule format.
  • Summary of all information input by the user.
  • For an additional fee – 481(a) adjustment calculation schedules (needed for properties acquired in prior tax years).

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