Are you a commercial property owner?

1. Are you a commercial property owner? Ta x R e d u c t i o n E x p e r t s Bonus depreciation can help you Reduce Income Taxes!

2. WHAT IS BONUS DEPRECIATION? Bonus Depreciation is a conservative, IRS-defined approach for reducing or eliminating your federal incomes taxes. Bonus Depreciation BOTH reduces and defers state and federal income taxes. www.expertcostseg.com It reduces income taxes by converting ordinary income to capital gains. It defers income taxes by increasing depreciation in the first year of ownership.

3. WHAT IS DEPRECIATION? An accounting tool which allows a portion of your asset value to be deducted each year from your generated income, thereby reducing your net income and resulting federal tax burden. This provides an acknowledgement of the decrease in value of personal property and/or some real property due to wear and tear, aging, functional obsolescence and other factors. Straight-line depreciation allows you to depreciate your asset over 39 years for standard commercial assets, or over 27.5 years for apartments. www.expertcostseg.com

4. www.expertcostseg.com WHAT IS DEPRECIATION? Let's consider a small office building Depreciable Basis of Improvements $1,600,000 Purchase Price $2,000,000 Land Value $400,000 Annual Depreciation $41,025 ($1.6M / 39 years) When filing your income taxes for the ownership entity of the asset, you would be able to deduct $41,025 in depreciation from generated income. You would effectively save over $15,000 in taxes (based on a 37% tax bracket) by utilizing straight-line depreciation.

5. www.expertcostseg.com WHEN COST SEGREGATION COMES INTO PLAY Cost Segregation breaks out the components of an asset into the appropriate depreciation life span, allowing for shorter recovery periods and accelerated depreciation. It involves parsing the asset into 5, 7, and 15 year depreciation periods, with the remaining long life assets being broken out into the requisite Units of Property

6. CONSIDERING THE PREVIOUS EXAMPLE Purchase Price $2,000,000 Land Value $400,000 Depreciable Basis of Improvements: www.expertcostseg.com 5 Year Assets $192,000 7 Year Assets $8,000 15 Year Assets $208,000 39 Year Assets $1,192,000 Annual Depreciation $80,868 That’s roughly DOUBLE the depreciation you can expect from straight-line depreciation, and could lead to bottom line tax savings of almost $30,000 in the same 37% tax bracket.

7. FINALLY, THESE ARE THE RESULTS WHEN BONUS DEPRECIATION STEPS IN! Any commercial, for-profit asset placed in service or purchased after September 27, 2017 can be depreciated by 100% of the value in the first year of ownership i.e. for any portion of the asset with a depreciation-life of 20 years or less For most commercial properties, O'Connor typically find assets with a depreciation life of 5 years, 7 years and 15 years, along with the 39 year depreciation life, during the course of our cost segregation studies. Assets found in those shorter depreciation life categories can be depreciated 100% in the first year of your ownership of the asset.This can amount to between 25% and 45% of the total asset value, depending upon our findings during the site inspection!

8. CONSIDERING THE PREVIOUS EXAMPLE Purchase Price $2,000,000 Land Value $400,000 Depreciable Basis of Improvements: www.expertcostseg.com 5 Year Assets $192,000 7 Year Assets $8,000 15 Year Assets $208,000 39 Year Assets $1,192,000 First Year Annual Depreciation $408,000 This is about 10 times the first year depreciation available via straight-line depreciation, and more than five times from standard cost segregation! In a 37% tax bracket, that equates to just over $150,000 in positive bottom line impact

9. Are you interested in taking advantage of the new tax laws, protecting your bottom line, and maximizing your cash flow, act now. www.expertcostseg.com