We have all learned from childhood that it is prudent to get a second opinion if we are diagnosed with a serious illness. We want to verify its existence and learn the most appropriate course of treatment to become well again. Wouldn’t you agree that paying more taxes than tax law really requires is a serious threat to your financial health?
A Second Opinion Tax Diagnosis done by a qualified tax planning professional can help you discover ways to pay less taxes on income and, perhaps, even recoup taxes that you have already paid. This tax review can help hasten your own personal day of Tax Freedom. For example, if you own apartments or other improved investment property, you are likely a candidate to take advantage of cost segregation.
This tax law allows an owner the opportunity to significantly accelerate portions of the depreciation being taken on their property. By reclassifying a wide range of building improvements, the depreciation taken on these components can be lawfully re-characterized as personal property and land improvements instead of structural components of the building. This results in instant tax benefits that can be applied to offset taxable capital gains on property to be sold or be used to increase tax-free cash flow.
A Second Opinion Tax Diagnosis done by a qualified tax planning professional can help you discover ways to pay less taxes on income and, perhaps, even recoup taxes that you have already paid.
These added tax benefits, however, must first be validated per IRS regulations by conducting a formal study on the property by an independent third-party authority using an engineering approach to substantiate the benefits. Few CPAs are qualified to do the study and meet these guidelines. In fact, many CPAs, as well as seasoned investment real estate property owners, are not even aware that these benefits are available.
Here are three examples to illustrate the types of benefits that this law can provide:
- A small business owner and her husband reluctantly paid $40,000 in taxes for their previous year’s income. They contacted a tax planner to do a Second Opinion Tax Diagnosis on their returns to see if any deductions might have been overlooked by their tax preparer. Reviewing their tax returns, the planner found added tax benefit that could be gained through their business. He also verified more than $250,000 in first year accelerated depreciation benefits using cost segregation on four investment properties they own. This benefit alone will restore to them more than $80,000 in previously paid taxes.
- An office building was purchased for $10 million and provided the owner $2,564,100 in straight-line depreciation benefit during the 10 years he has owned the property. Cost segregation captured an additional $1,358,970 in accelerated depreciation which released for the owner a first year increase in income tax-free of $475,640.
- Without first considering the tax impact, a property owner sold and closed escrow on one of his rental properties the previous year. He soon discovered afterwards that he was responsible to pay nearly $100,000 in capital gains taxes, which prompted him to investigate if anything could be done to solve the problem. Reviewing his real estate portfolio with a qualified tax planner, he disclosed that he owns several small apartment buildings, tri-plex and four-plex units and commercial buildings. An analysis of his properties identified enough cost segregation benefits were available to completely offset the taxable gain on the property he had sold. This resulted in eliminating all taxes on the sale and him pocketing almost $100,000 more in tax-free profit.
Cost segregation captured an additional $1,358,970 in accelerated depreciation which released for the owner a first year increase in income tax-free of $475,640.
Everyone’s situation is, of course, different and you may not enjoy the same levels of benefit as these property owners have. However, wouldn’t you agree that it makes good sense to investigate if these types of tax benefits are available to you, too? Certainly, it is. If your properties qualify, you also may be headed toward significant tax recovery. You might even be able to capture significant tax benefit on property that you sold within the past three years and no longer own.
So, here is my encouragement to you: take to heart what author F.J. Raymond once quipped: “Next to being shot at and missed, nothing is really quite as satisfying as an income tax refund.”