Real Estate Accounting – Newport Beach CA

Cost Segregation – Tax Reduction Strategy

Cost segregation is the process of identifying your assets and classifying those assets correctly for the purpose of paying federal taxes. In this process, personal assets that are mixed with real property assets are separated out, so all assets can be depreciated properly and potentially increase your bottom line.

Cost Seg2Cost Segregation Studies

A cost segregation study is performed to determine which assets can be claimed as personal property instead of real property. These items usually include indirect construction costs, non-structural elements of buildings, and exterior land improvements.

By separating these assets, they can be depreciated over a shorter term which will reduce your current income tax liabilities and increase cash flow. This decreased depreciation period is typically between five and fifteen years instead of the twenty-seven and a half to thirty-nine years for non-residential real property.

For example, items such as carpeting, wall paper, parts of the electrical system, and even sidewalks and landscaping all qualify for the shorter depreciation periods.

Eligibility and Advantages of Cost Segregation

To be eligible for cost segregation, a building must have been purchased, remodeled, or constructed since 1987. This method of tax reduction is best used on new construction, but it can be used retroactively on older buildings as well.

Beyond the benefits of reduced tax liability and increased cash flow, a cost segregation study will provide your business with an audit trail of all costs and asset classifications. This will help put to rest any unwanted inquiry from the IRS in its early stages. Finally, during this process, you may identify possible ways to reduce your real estate tax liabilities as well.

While there are some costs associated with performing a cost segregation study, as long as the assets in question are valued over $200K, it’s worth the time and expense to complete the study and categorize these assets correctly.

If you are tired of overpaying taxes, then call 949-759-5626 and ask for Jerry Morey.  Our initial consultation is free.

 

Morey & Associates is a Southern California CPA Firm with offices in Newport Beach and San Clemente CA.  We work with business owners throughout Orange County and Los Angeles.  Our specialty is real estate accounting.

 

Using Cost Segregation to Save Taxes for Orange County Businesses

Cost segregation is the process of identifying your assets and classifying those assets correctly for the purpose of paying federal taxes. In this process, personal assets that are mixed with real property assets are separated out, so all assets can be depreciated properly and potentially increase your bottom line.

Cost Segregation Studies

Cost Seg StudyA cost segregation study is performed to determine which assets can be claimed as personal property instead of real property. These items usually include indirect construction costs, non-structural elements of buildings, and exterior land improvements.

By separating these assets, they can be depreciated over a shorter term which will reduce your current income tax liabilities and increase cash flow. This decreased depreciation period is typically between five and fifteen years instead of the twenty-seven and a half to thirty-nine years for non-residential real property.

For example, items such as carpeting, wall paper, parts of the electrical system, and even sidewalks and landscaping all qualify for the shorter depreciation periods.

Eligibility and Advantages of Cost Segregation

To be eligible for cost segregation, a building must have been purchased, remodeled, or constructed since 1987. This method of tax reduction is best used on new construction, but it can be used retroactively on older buildings as well.

Beyond the benefits of reduced tax liability and increased cash flow, a cost segregation study will provide your business with an audit trail of all costs and asset classifications. This will help put to rest any unwanted inquiry from the IRS in its early stages. Finally, during this process, you may identify possible ways to reduce your real estate tax liabilities as well.

While there are some costs associated with performing a cost segregation study, as long as the assets in question are valued over $200K, it’s worth the time and expense to complete the study and categorize these assets correctly.

Morey and Associates, CPA helps business owners lower their tax liability and cost segregation is just one tactic to make this happen.  We work with all types of businesses throughout Orange County from our offices in Newport Beach and San Clemente.  For clients that are have significant real estate and fixed assets, we have developed a specialty in real estate accounting.

Call us at 949-759-5626 and ask for Jerry Morey.

Tax Exclusion for Sale of a Home

Taxes for Sale of Home

If there is one sure thing about life in the U.S from a financial standpoint, it is this: taxes and profits go hand-in-hand. This includes the sale of a home. However, if you meet certain criteria, there are enough credits, exceptions, and exclusions to make the entire process surprisingly light on taxes. In fact, many homeowners are able to escape tax-free as long as certain conditions are met.

Profit Exclusions

Any single person selling his or her primary residence can treat as much as $250,000 profit from the sale as tax free. That amount doubles for married couples who file jointly. You can use this exclusion every time you sell your primary residence provided that you lived in the property for at least two years and have not received the exclusion for the sale of another home within the two years prior to this sale.

Exceptions to the Rules

There are some instances where you can receive a partial exclusion on the profits from your home sale even if you haven’t lived in the home for the full two-year period.

If you have a change of employment that forces you to sell your home for financial reasons or the purpose of relocation, for instance, you may claim a portion of the funds. This is also true in the event of divorce, multiple births from a single pregnancy, and other factors.

 

If you have questions about maximizing your tax exclusions from the sale of a home, now, before the sale takes place, is the perfect time to consult us to get the answers you need. Call 949-759-5626 and ask for Jerry. 

Morey and Associates is an Orange County CPA Firm with an expertise in real estate accounting.  We work with real estate property managers, real estate investment trusts and investment groups of all kinds.  We have two conveniently located offices to service the entire Orange County California area.