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If you own real estate and pay federal income taxes, you can benefit from the results of a cost segregation study. A cost segregation study is an analysis performed by trained professionals to identify property that should be classified as tangible personal property or land improvements, rather than real property that is depreciated over 27.5 or 39 years. This allows the taxpayer to identify property that can be depreciated over 5, 7, or 15 years instead of the 27.5 or 39 years that typically apply to real estate. This acceleration of deductions results in substantial tax savings benefits.

Cost segregation studies apply to both newly acquired or constructed property, leasehold improvements/fit-ups, and property that was placed in service in prior years (post 1986). For property placed in service in prior years, the IRS allows a “catch up” deduction in year 1 for the additional depreciation deductions that are identified in a cost segregation study that you were entitled to but did not claim in previous years. This can generate substantial tax savings in the first year of the study.

There is no limitation on the cost of property that is eligible for a cost segregation study. The benefit of a study for a smaller building will be less than that of a larger property, but may still be very beneficial. We have worked with several industries to provide cost segregation studies including auto dealerships, banks, commercial and residential property owners, medical facilities, and manufacturing facilities.

Bonus depreciation and Section 179 expensing elections allow taxpayers to write off 100% of qualified tangible property with a recovery period of 20 years or less and certain qualified leasehold improvement property that is placed in service in 2018. Thus, the 5, 7, and 15 year property that is identified in a study may qualify for this additional depreciation deduction that wouldn’t normally be identified if the property was being depreciated over 27.5 or 39 years. These tax incentives for 2018 make cost segregation studies even more beneficial for the current tax year as it applies to both newly constructed and existing properties. Similar tax incentives are also available for property placed in service in tax years 2008-2017.

One of Dean Dorton’s most recent cost segregation studies on a $9.1 million manufacturing facility that was constructed in 2017 generated tax savings in the first year of $777,000. The present value of accelerated deductions (discounted at 8%) exceeded $773,000. The return on investment for this study was 105.0 to 1.

Dean Dorton uses an Atlanta-based engineering firm to provide cost segregation studies to our clients. This engineering firm conducts studies that conform to the Cost Segregation Audit Techniques Guide issued by the IRS. They have performed over 15,000 studies and have successfully defended all challenges brought forth by the IRS.

We work in tandem with your CPA, whether you are served by a large international firm, a regional firm, or a local accountant, to serve your best interests and save you money.

To find out more or schedule a review of your properties, contact your Dean Dorton advisor or Brandi Marcum at bmarcum@deandorton.com or (859) 425-7678.

Article Dean Dorton

As enterprise cybersecurity awareness continues to evolve, so do the layers of protection any business or nonprofit organization needs to have in order to protect themselves. From user awareness training to vendor management, Dean Dorton Technology’s new cybersecurity team helps clients regularly diagnose, manage and mitigate their cybersecurity risks.

Dean Dorton Technology’s team provides holistic solutions that can be scaled from small nonprofit organizations to large public companies. Not sure where to start or struggling to hire and retain information security professionals? Dean Dorton Technology now has the team to provide your own outsourced Information Security Office.

Gui Cozzi joins Dean Dorton Technology with more than 20 years of experience in cybersecurity and successfully implements pragmatic and risk based security programs to meet compliance with organizations’ security requirements. Gui leads a team responsible for delivering enterprise cybersecurity services and personally specializes in information security program development, implementation, and assessment. His work is focused on positioning organizations to successfully identify and manage their information security risks.

Prior to joining Dean Dorton, Gui served in various Information Security leadership roles including implementing the Security Risk Management program for one of the nation’s largest health systems, leading teams of cybersecurity consultants, and serving as Chief Information Security Officers for organizations in various industries.

“We are thrilled to have Gui Cozzi on our team. As cyberattacks become an everyday occurrence, it is essential organizations adapt their cyber-governance programs and take proactive steps to ensure they are compliant and protected across the board,” says Jason Miller, Director of Business Consulting Services. “Many security controls and systems are behind the scenes and until they are comprised organizations may not know if they are providing the level of protection they expect and at that point too much damage has already occurred. Our Information Security Office program, led by Gui, offers peace of mind to clients that their cybersecurity programs are effective across the board.Learn More About our Cybersecurity ServicesDean Dorton Technology brings every aspect of cybersecurity programs in one place with a variety of features, products, and services that complement each other and deliver multiple, key layers of cybersecurity including:

  • Virtual Information Security Office
    • Security Risk Assessments
    • Security Policies and Procedures
    • Security Awareness Program
    • Technical Security Solutions
    • Incident Response
    • Security Reporting
  • Cybersecurity Assessment Services
    • External/Internal Security Assessments
    • Adversarial Threat Simulation (Pen testing)
    • Application Security Assessments
    • Cloud Security Reviews
    • Mobile Device Security Reviews

Beyond the technology and the platform capabilities, Dean Dorton’s cybersecurity team reviews and analyzes any testing results and assessments, effectively adding another layer of analysis (and protection) to determine the maturity of your organization’s cybersecurity program and procedures. Dean Dorton then designs, implements, and can help clients maintain their comprehensive line of security program services, tailored to clients’ needs.

“We are thrilled to have Gui Cozzi on our team. As cyberattacks become an everyday occurrence, it is essential organizations adapt their cyber-governance programs and take proactive steps to ensure they are compliant and protected across the board.”

Jason Miller, Director of Business Consulting Services

Article Dean Dorton

You are probably aware that late last year, The Tax Cuts and Jobs Act (TCJA) made substantial alterations to the tax laws, resulting in sweeping changes to individuals and businesses. Although not specifically addressing the energy sector, many of these modifications will have a positive impact on energy companies.

One of the changes effectively lowered the cost of capital equipment acquisitions by changing the rules for bonus depreciation. Under previous tax rules, 50% bonus depreciation was available for certain “new” eligible property used in a business or in an income producing activity. By accelerating the deduction for machinery, most software, and real property,  50% bonus depreciation was able to lower the true economic cost of these assets. Under TCJA the bonus depreciation is now 100%, generally only applying to property that is acquired and placed in service after September 27, 2017.

Bonus depreciation is available for new and the majority of previously used property, as opposed to before the Act, where property was required to be new. However, the used property will now qualify unless the taxpayer both (1) previously used the property and (2) acquired the property in certain forbidden and tax free transactions, or through a related person or entity. Similar to before, taxpayers should sometimes make the election to turn down bonus depreciation (an “election-out”). Sole proprietorships and entities taxed under the rules for partnerships and S corporations still want to make sure that they don’t “waste” these deductions by applying them against lower-bracket incomes in the year property was placed in service when given an opportunity to apply them against higher bracket income in later years. Under the Act, entities taxed as “regular” corporations are taxed at a flat rate.

While these are the major aspects of bonus depreciation, the TCJA made several smaller significant changes. Even without amendment, TCJA bonus depreciation is a complicated area with tax implications for transactions that are not simple asset acquisitions. There are phase-outs away from 100% over the next few years until bonus deprecation is generally no longer available under current law, beginning after December 31, 2026.

The multitude of changes brought by TCJA can impact your business, with bonus depreciation being only one. Consult with your tax advisor when considering asset acquisitions to get the most benefit from tax savings from these changes in the law.

For more information, contact your Dean Dorton advisor or Bert Layne, CPA at blayne@deandorton.com.