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.