Cost segregation can mean tax savings and increased cash flow for manufacturers
Cost segregation can be a strategic tax-saving tool for manufacturers who have purchased, renovated, or constructed property in the last 15 years.
Cost segregation saves one manufacturer $145,000 in one year
We recently used our detailed engineering approach on a new, $4 million manufacturing plant. We were able to allocate more than $1.5 million to short-lived property — land improvements (15-year life); office furniture, fixtures, and equipment (seven-year life); and information systems (five-year life).
The result of our analysis was a tax savings of $145,000 in one year, and $387,000 over the first five years.
Cost segregation analysis identifies personal property that can be depreciated over a variety of shorter recovery periods utilizing accelerated depreciation methods. Without cost segregation, building components are depreciated over 39 years.
The ideal time for a cost segregation study depends on your tax situation. It can be:
Post-purchase, Remodel, or Construction — IRS Form 3115, Application for Change in Accounting Method, makes it easy to go back and claim missed depreciation on assets acquired as far back as 1987 without amending prior tax returns.
Year Placed in Service — The optimum time is during the year a building is being constructed, purchased, or remodeled. This allows the owner to immediately optimize tax savings and accurately classify assets.
You will appreciate our expertise and thoroughness
Our cost segregation consultants include accountants, engineers, and attorneys. They have the experience and skills to help you identify and document the shorter-lived assets in your project. They also know the judicial decisions, IRS rulings, regulations, and interpretations that make cost segregation studies complex.
Our hope is that you will appreciate the bottom line savings created by our expertise and thoroughness.
We offer a proven methodology
Plante Moran has a three-stage approach to cost segregation analysis. We begin by interviewing you so that we can understand your organization’s scope of capital investments. We then estimate your cost segregation benefit to help you decide whether cost segregation is right for you.
If you decide to move forward with a cost segregation analysis, we visit your site and gather relevant data and documents. We use the information to conduct an engineering and tax analysis and prepare your report. In the final phase of the analysis, we review the report with you, prepare any necessary tax compliance forms (Form 3115 — Application for Change in Accounting Method), and deliver the final study.
Do you have hidden cash in your property?
Cost segregation services are another way Plante Moran tax specialists help manufacturers. Our menu of services for manufacturers includes: