July 25, 2016

Discovered Additional First Year Deprecation Deduction of over $400,000 Using Cost Segregation Study

An office building was constructed from the ground up at a total cost of $3.3 million. As a result of a cost segregation study, nearly $731,000 of costs were re-categorized from 39-year property to 5, 7 and 15 year property.  This resulted in an additional first year depreciation deduction of over $400,000.

All Insights

July 25, 2016

Used Cost Segregation Study to Save Auto Dealer Over $273,000

Our client, an auto dealer, purchased a commercial building for $1.6 million and incurred $1.5 million in renovation costs in 2014. After a qualified cost segregation study was completed, over $1.4 million of assets were broken down into 5-, 7- and 15-year MACRS property. The net present value (the cumulative value of accelerated tax savings) of completing the cost segregation study was over $273,000.

Find out how a Cost Segregation Study can benefit your business.

All Insights

July 25, 2016

Used Bonus and Accelerated Depreciation for 40% of Costs in Assisted Living Facility Construction

A new assisted living facility was built at a total cost near $5.8 million. After our client engaged us to complete a cost segregation study, roughly 40% of the costs ($2.4 million) were eligible for bonus depreciation and accelerated depreciation.  The net present value over the life of the project was over $432,000.

Find out how a Cost Segregation Study can benefit your business.

All Insights

July 25, 2016

Discovered Depreciable Property on Purchased Golf Course

Our client purchased a golf course for $6.7 million in 2013. Due to complex depreciation rules surrounding golf courses, and to ensure they weren’t leaving deductions on the table, our client decided to perform a cost segregation study on the purchase. During the study, it was determined that the tees and greens were up to USGA standards and therefore we could treat what otherwise would be non-depreciable land as depreciation property. The net present value of the study was over $309,000.

Find out how a Cost Segregation Study can benefit your business.

All Insights

July 12, 2016

Turned Research & Development Expenses into $30,000 in Federal Tax Credits

We recommended a manufacturing client consider a research credit study to determine if federal credits could be taken on their tax return.  Based on findings of the study, the company spent quite a bit on research and development activities and resulted in a $30,000 federal tax credit.

All Insights

July 5, 2016

Missouri Historic Tax Credits Maximize Your Renovation Tax Savings

Recently announced redevelopment projects in the City of St. Louis include the Jefferson Arms Building on North Tucker Boulevard, the former CPI Corp. headquarters on Washington Avenue, and the LaSalle Building on Olive Street. What do these proposed projects have in common? They all plan to utilize the Missouri Historic Tax Credit Program to help finance the projects, according to recent issues of the St. Louis Post-Dispatch.

It may surprise some real estate investors and owners that the state of Missouri offers a tax credit for historic building renovation and rehabilitation. The Historic Tax Credit aims to encourage private sector rehabilitation of historic buildings and economic development and is a valuable incentive for the redevelopment of both commercial and residential historic structures. A significant amount of money can be recuperated from the costs associated with restoring or renovating qualified property – up to 25% – along with the option to sell, transfer, or carry forward the benefits as desired.

Historic Tax Credit Qualification

A Missouri building must achieve certain requirements for it to be eligible to receive Historic Tax Credits. The actual age of a property doesn’t necessarily factor into whether it meets “historic” criteria. To qualify, the state requires that the property must either be:

  • Individually listed on the National Register of Historic Places
  • A contributing structure in a National Register Historic District
  • Located within and a contributing resource to a Local Historic District certified by the U.S. Department of the Interior

In addition, renovations need to be substantial enough to meet the required minimum investment threshold established by the state. Rehabilitation costs must be 50% or more of the acquisition cost of the property – beginning after the applicant’s receipt of a letter from the Department of Economic Development conveying preliminary approval and the applicant’s credit allocation. Furthermore, the Missouri State Historic Preservation Office must approve all rehabilitation plans.

Qualifying Expenses

Qualified costs include those associated with work undertaken on the historic building, architectural and engineering fees, legal expenses, development fees, and other construction-related costs if those costs are added to the basis of the property and are determined to be reasonable. Acquisition costs, furnishing costs, new additions that expand the building, new building construction, parking lots, sidewalks, and landscaping do not qualify for the program.

State Reporting Requirements

For projects with total project costs (excluding acquisition) of less than $250,000, the state requires applicants to engage a CPA to compile the list of project expenditures in the format specified by the Missouri Department of Economic Development (MODED), including invoices and proofs of payment.

For projects with total costs of $250,000 or more (again, excluding acquisition), a CPA licensed in the state of Missouri must be engaged to audit the list of project expenditures and certify that all costs adhere to program guidelines.

Credit Amount and Uses

Both income and owner-occupied qualified properties may be eligible for a 25% tax credit against Missouri state tax liability. There is also a federal Historic Tax Credit available, which may be used in combination with the Missouri state credits – but only for the rehabilitation of commercial or income-producing properties as non-income producing residential properties do not qualify for the federal tax credit. Any unused state tax credits can be carried back three years or carried forward 10 years. They are also eligible to be sold or transferred if desired.

We’re Here to Help

Assistance from a CPA is required for any Historic Tax Credit project, and Anders has extensive experience with this program as well as other related tax credits, including the Neighborhood Preservation Act Credit. If you want to maximize your renovation project’s tax savings and ensure you have exhausted the full list of eligible expenditures, Anders wants to help. For additional information, check out the Missouri Historic Tax Credit Cheat Sheet or contact Anders.

All Insights

Keep up with Anders

Want to keep up with all the latest insights from Anders? Subscribe and receive the information that matters to you.

  • This field is for validation purposes and should be left unchanged.