Identifying Value-Added Tax Opportunities
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Cost Segregation
(Federal & State Deductions)
Allows taxpayers who have constructed, purchased, or improved real estate to accelerate depreciation deductions by reclassifying building components into shorter tax lives.
Who Is It For?
- Any building with over $500k of depreciable tax basis (excluding land).
- Any leasehold improvement with over $200k of depreciable tax basis.
- Companies with large fixed asset schedules.
- Companies that make repairs frequently
How Much is it Worth?
Increase cash flow by roughly 5% – 8% of the total building cost.
If client qualifies for 100% bonus depreciation, there is an increase of Cash Flow by Roughly 6% To 14% Percent Of Building Cost in Year One.
Example:
- $3.4M Acquisition of 40,000 square foot Office Building
- First Year Depreciation Deduction $1.2M
- 5 Year NPV $675,000
- Acquisition of $4.3M triple net lease big box retail property
- reallocated 24% into shorter life 5 and 15 year property.
- The overall cost/benefit ratio is 53 to 1.
Research & Development Tax Credits (Federal & State)
Federal and state tax credit designed to reward companies for innovation
Who Is It For?
Any company that has spent time developing new, improved and more reliable products, software, processes and formulas
How Much is it Worth?
Any company that has spent time developing new, improved and more reliable products, software, processes and formulas
Example:
Software Developer
$985,000 in R&D Tax Credits Annual Revenue: $11.5 million
Architectural Firm
Offset $250,000 of their federal payroll tax liability using R&D credits.
Startup Company
$195,000 in R&D Tax Credits Annual Revenue: $8.5 million
Commercial Energy Deductions / Section 179D
(Federal)
This deduction is for building owners with a cost basis in the construction of energy efficient building construction or improvements including renovations to the lighting or HVAC systems.
Who Is It For?
Available to commercial building owner and for Architects, Engineers, and Design/Build Contractors that work on Public or Government Buildings
How Much is it Worth?
$.30 to $1.80 per square foot in Federal Tax Deductions.
Example:
- 250,000 sq ft multi- family property
- Qualified for $1.80 PSF Benefit (Lighting, HVAC, and Envelope)
- $450,000 Tax Deduction
- 140,000 sq ft parking garage $0.60 Benefit
- $84,000 Tax Deduction
- 280,000 sq ft School $1.80 PSF Benefit (Lighting, HVAC, and Envelope)
- $504,000 Deduction to Design/ Architecture Firm
Residential Energy Credits / Section 45L (Federal & State)
Federal credit for developers of Apartments, Condos, that meet certain energy efficiency standards. Units must be certified by a qualified professional to be eligible.
Who Is It For?
Anyone that has built Apartments, Condos, or Production Home Developments in the last 4 years. Generally, more than 20 units.
How Much is it Worth?
$2,000 Federal Credit per apartment/ home unit.
Credit is realized when unit is first leased or sold, not placed in service.
Example:
75
unit apartment/condo in Florida
$150,000
of Federal Tax Credits
110
Apartments in Chicago Suburbs
$220,000
Federal Tax Credits
Partial Dispositions “Asset Retirement Study”
(Federal)
Assign value to “structural” components removed from a building and write off the remaining basis
Who Is It For?
- Any building renovation costs
- Retirement Study Building is renovated AFTER owning it at least 1 year
- Retirement Study Renovations that include roof, HVAC, windows, lighting, plumbing, ceilings, drywall, flooring, etc.
How Much is it Worth?
Additional Year 1 deductions of 20%-35% of renovation costs
Example:
Assign value to “structural” components removed from a building and write off the remaining basis
Fixed Asset Tax Review
(Federal & State)
Complete review of company’s entire Fixed Asset listing & supporting documents to assign appropriate tax lives, identify retirements, and correct items that should be expensed. Includes Cost Segregation & Dispositions analysis.
Who Is It For?
Retail, Restaurant, Bank and Hotel Chains of 10 or more Manufacturing Operations with large fixed asset schedules $35M in real property or more than 400 lines in fixed assets
How Much is it Worth?
Net Present Value of 5-8% of total building- related costs.
Example:
Manufacturing client has $60M of 39- year fixed assets. NPV Cash value = $3M - $4.8M
Accounting Firms
Your strategic alliance with Meridian will ensure an added benefit to all your clients allowing the opportunity to find additional deductions, and credits that increase your tax payers bottom line.