Cost
Segregation
How
Can You Save on Property Taxes?
As state
and local governments seek ways to increase revenues and
federal tax benefits decrease, companies now must pay closer
attention to their property taxes and make property tax
management an integral part of their cost-management strategies.
Property
taxes seem to continue to rise throughout the country and
have become a principal source of municipal operating revenue.
Various state property tax reforms and classification measures
have forced taxing jurisdictions to maintain the local tax
burden on local businesses, despite the escalation of residential
property values. And many of the tax reform propositions
recently enacted have made it necessary to focus on new
business property investments as additional sources of tax
revenue.
A cost
segregation study has a third potential benefit. You can
obtain a lower assessment by separating non-valued cost
items - or costs that are not real property costs - from
your reported costs of construction or acquisition.
For
example, overtime hours, demolition of the former building,
and some change orders increase the cost of the construction
project, but do not add to the market value of the completed
building - even though they were necessary and the expenses
were paid. These costs do not belong in your building's
tax basis. They can be exempted in certain states, if the
costs are correctly identified and documented.
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