Donating Real Estate? Consider Doing A Cost Segregation Study First!

Generally, investors will consider making a charitable contribution or donation of real estate for tax purposes.  There may be other objectives, but tax planning is often the primary motivation.

So, if you are going to make a charitable donation of real estate to a qualifying charity of your choice, why not take full advantage of the tax planning opportunities available to you? 

Cost Segregation Study

You should give serious thought to doing a Cost Segregation Study first, which would allow you to accelerate your depreciation deductions on the personal property components associated with the commercial real estate, and then you can complete the charitable contribution and receive your tax deduction for the donation.   

It's the best of both worlds.  You speed up depreciation write offs for the personal property and take a catch up tax deduction in the current year for the prior year depreciation that you did not take, and then you also receive your charitable contribution deduction either through an outright contribution or through a charitable remainder trust. 

The longer you have owned the property, the more you can benefit from a Cost Segregation Study prior to making a charitable contribution.  I would be happy to discuss this use of the Cost Segregation tax planning strategy with you, just call.

What Is Cost Segregation?

Cost Segregation Tax Savings Benefit Analysis

If you as a commercial real estate investor have completed a 1031 exchange and the replacement property you purchased cost more than the property or properties you sold, you may be eligible for substantial state and federal tax savings that you can only obtain through a cost segregation study.

A cost segregation study is a strategic analysis that allows owners of commercial real estate to increase their cash flow by accelerating depreciation-related tax deductions. To do so, the study identifies, segregates and reclassifies property costs currently being depreciated over the typical 39-year depreciable period to shorter depreciable periods of 15, 10, 7 or even 5 years. This means you can enjoy tax deductions right now that you’d otherwise have to wait years to receive. So you’ll not only increase the net value of current tax savings, but also boost your cash flow.