DMJ Services

We deliver each of our services through a team of financial professionals who adhere to the highest standards of our industry. And when you become a DMJ client, everyone on our team works for you.

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DMJ Services

We deliver each of our services through a team of financial professionals who adhere to the highest standards of our industry. And when you become a DMJ client, everyone on our team works for you.

Cost Segregation

Substantial Tax Deduction Acceleration on Business Property

Whether you are constructing a new building, expanding an existing one, purchasing real estate, rehabilitating an old facility or relocating with leasehold improvements, your property can generate much faster tax deductions and cash flow savings than you realize. Substantial tax deduction acceleration and cash flow savings can be achieved by taxpayers who properly classify their construction or acquisition costs between real and personal property.

A cost segregation study carefully breaks down construction and/or acquisition costs and allocates them to specific categories – maximizing accelerated depreciation for qualifying building components. The shorter the depreciation period, the faster your tax savings.

Our detailed cost segregation studies pay for themselves many times over, starting with the first year the property is placed in service. By investing in a professionally prepared cost segregation from DMJ & Co., PLLC you will have the assurance that you have maximized your depreciation benefits and have fully documented support for your depreciation claims should you be audited by the IRS.

A Proven Approach

At DMJ, the key to a successful cost segregation study is that the allocation is based on an engineering approach combined with work paper documentation. We work in close affiliation with a professional group of construction engineers who have a thorough knowledge of the tax code and experience in successfully defending cost segregation studies before the IRS since 1981. Using tax, construction and engineering skills, we thoroughly analyze your construction and/or acquisition costs. We then perform quantity take-offs from the construction drawings, which maximize the amount of personal property costs and provide the required documentation to support our conclusions.

How a Cost Segregation Study Works

Building costs are generally classified for federal income tax purposes into three categories. Each category has a different depreciation recovery period and method under the Modified Accelerated Cost Recovery System (MACRS).

Tangible Personal Property 5 or 7 years
Land Improvements 15 years
Real Property 39 years

A cost segregation study performed by DMJ will help you identify items that should be properly classified. For example, a taxpayer who owns a manufacturing facility could classify the cost of certain equipment foundations, exhaust and ventilation systems, security systems and electrical distribution as tangible personal property. Certain site improvements such as landscaping, underground utilities and site lighting could qualify as land improvements. Knowing the difference is critical. So is the ability to support and document the decisions.

Our professionals unbundle costs and assign them appropriately – not only the direct costs, but also a portion of any indirect costs, such as architect and engineering fees, contractor’s general conditions, permits and bonds. We have extensive knowledge of construction methods, engineering and the Internal Revenue Code, including the applicable tax court cases and revenue rulings. Our capabilities, which combine accounting and engineering expertise, include the ability to read blueprints and fully understand construction materials, costs and taxation.