Cost Segregation Opportunities

Do you own real estate? Are you looking to purchase or construct a new building? As you may already know, the cost of a building is required to be deducted over its depreciable life. For federal income tax purposes, the IRS requires 27.5 years for residential properties and 39 years for commercial properties. This leaves property owners with a couple problems. First, that is an awful long time to recover the cost of a building. Second, a building is not always just “sticks and bricks”. Many times, the cost includes several different types of property that may have significantly shorter depreciable lives which would potentially qualify the property for immediate expensing through bonus depreciation and section 179 provisions. Examples of this would be furniture, equipment, and land improvements just to name a few. A cost segregation involves bringing in experienced professionals who can break down the cost of a building into its various components. This often results in 27.5-year and 39-year property being classified as 5-year, 7-year, or 15-year property. With depreciation being accelerated by several years, the net present value savings is often quite significant. Additionally, this is not just available on new construction. Cost segregation studies can also be performed on property that was purchased in a previous tax year. In this situation, a “catch-up” depreciation deduction can be taken into account for depreciation that would have been taken in prior years. While cost segregation studies can offer significant tax savings, consideration needs to be given to the taxpayer’s entire tax situation. Be sure to consult with our Bertz, Hess & Co. professional team before making a final decision on pursuing a cost segregation.

PPP Loan Forgiveness Applications

The Small Business Administration (SBA) recently issued an interim final rule regarding PPP loans that addresses early applications for loan forgiveness. While many small businesses are seeking to apply early, it could actually come at a cost. By applying early, the safe-harbor provision allowing them to restore wages by December 31 is forfeited. Read more about it here

In addition, before the lenders can complete their forgiveness application, the SBA still needs to issue final guidance to them. After the lenders receive final guidance from the SBA, they will need to update their loan forgiveness application process and then it will be possible to complete the application.

Updates and Reminders

Should you adjust your tax withholding? – This is a good time of the year to review the amount of federal income tax being withheld from your wages or pension payments. If you owed tax to the IRS when your 2019 return was completed and you haven’t increased your 2020 estimated tax payments or you haven’t changed your withholding by filing an updated W-4 there is a good chance you will owe the IRS money when your 2020 return is completed. The IRS updated and revised the W-4 Form in December of 2019. Unfortunately, when they revised the W-4 they dramatically increased the level of difficulty involved in completing the form. Don’t hesitate to reach out to our team for help!

Where’s my Economic Impact Payment? – Still waiting on your Economic Impact Payment? You can click here to check the status and payment type.

Where’s my Refund? – For those of you still waiting on your refund, don’t forget that you can check the status at here.  With refunds being delayed, many taxpayers are receiving their refunds plus interest!

Your Bertz, Hess & Co. tax and business advisor will be happy to discuss any of these topics.

The Professional Service Team at Bertz, Hess & Co., LLP