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On Tuesday, August 17th an informative conversation on cost segregation studies and the 179D energy efficient tax deduction was held on Zoom. Steve Barnes of Wipfli LLP lead the discussion. You can watch the recording of the event here, and download the slides here.

Cost Segregation Studies
A cost segregation study provides an engineering-based analysis of the costs associated with acquiring, constructing or renovating a building. A properly completed study can deliver additional depreciation deductions and help to accelerate depreciation; increase current tax deductions; defer income tax; and increase cash flow. Even if the purchase, construction or building expansion occurred in a prior year, a cost segregation study and simple change in accounting method allows the tax filer to claim depreciation deductions of prior years without having to amend tax returns of prior years.

A cost segregation study can benefit anyone who has, or is in the process of purchasing an existing building, constructing a new one, or constructing leasehold improvements.

Many properties can benefit from a study, including manufacturing and industrial plants; healthcare and long-term care facilities; financial institutions; automobile dealerships; distribution centers and warehouses; office buildings; restaurants and hotels; retail and convenience stores; shopping centers; and apartment buildings.

179D Energy Efficient Tax Deduction
Under the Energy Policy Act of 2005, tax filers may qualify for the 179D energy efficiency tax deduction on construction or capital improvement costs designed to increase a building’s energy efficiency. Benefits of the deduction include gaining a maximum deduction of $1.80 per square foot when energy and power costs are reduced by 50 percent; if those costs are reduced by less than 50 percent, the filer may be entitled to a deduction of $.60 to $1.25 per square foot; and if the property is government-owned, the architects, engineers or contractors may be assigned the tax deduction, despite not having made the capital expenditure.

About Steve Barnes
Steven Barnes is a principal on the Wipfli cost segregation team with expertise in the engineering approach of cost segregation for both new construction projects and purchased properties. His understanding of construction finances and his ability to analyze construction documents are important assets in the process of cost segregation projects. Steve’s experience also includes Section 263A repair versus capitalization review tangible property studies and Section 168 fixed asset disposal studies.

Steve has years of experience adjusting the timing of deductions to provide clients with tax savings. Prior to joining Wipfli LLP, he helped lead a cost segregation practice at a regional CPA firm. Steve specializes in various industries including commercial real estate, hotel and convention, retail and wholesale, manufacturing, food processing, health care, residential, and auto dealerships.