Dispositive Analysis On Capital Expenses!
Leveraging the new tangible property regulations when making capital improvements can be a substantial contributor to lowering your overall costs. When combined with an energy audit, you can save in numerous ways. The new tangible property regulations in effect for 2014 and later years mostly frustrate tax accountants, and confuse small businesses and real estate investors. Taking advantage of these new regulations make capital expenditures pay off now. If you have not already been taking advantage of these regulations, please get in touch.
Let's say you have a real estate investment, e.g. a small office building, that youve owned for 5 years, and now you need to replace the roof. Prior regulations had you capitalizing and depreciating the new roof over the usual depreciable life while also depreciating the costs of the old roof which was included in the original purchase of your office. In effect you are depreciating two roofs. The one that came with the orignal purchase, which is not in a trash heap, and the new one. Who wants to do that? Now you can value deduct the current market value of that old roof, and we're not talking about salvage value here.
A Brief Example
To keep the math simple, suppose the new roof cost you $50,000 and we determine book value of the old roof is $39,000. Let's further assume the old roof represents $5,000 of your accrued depreciation. Deducting the $5,000 from the $39,000 leaves you with a $34,000 valuation for the old roof, and your accumulated depreciation is reduced by $5,000.
The result here is the new roof actualy cost you $16,000 and you will saved $1,000 of the capital gains tax you'll pay when you sell the property. And you didn't need a Cost Segregation Study to do it.
Who Can Benefit From An Dispositive Analysis
If you have a capital expenditure that results in an improvement to a unit of property, you most likely will benefit from a Dispositive Analysis. Apollo Energies can conduct this Dispositive Analysis.
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