3 Steps to Help Clients Understand 179D

Posted by Jennifer Birkemeier on 10/28/15 9:22 AM

How to give clients enough information that they understand the value of the deduction without getting too deep into the weeds.

179D_deduction_weedsThe Section 179D deduction for energy efficient construction and improvements to commercial buildings provides a great opportunity for commercial real estate owners to convert 39-year property into a deduction. Some clients will be perfectly happy to hear from you that a new election or credit will reduce their tax liability and that you are confident they can legally claim it on their return. Others, often newer clients or leads that you are trying to convert into clients, might want you to explain more about the opportunity in order to help them understand exactly what it is and how it relates to them. There’s always a fine line to walk with these folks, since they want to understand the value of what you’re doing for them but they don’t necessarily want to become experts on the topic.

A Trio of 3’s

The quickest way to remember the information that can help a client or potential client understand the value of Section 179D is the trio of 3’s:

  1. 3 Types of Construction Qualify:
    • Interior lighting systems.
    • HVAC systems.
    • Building envelope systems.
  2. 3 Levels of Qualification:
    • Level 1: To qualify for a $0.30-$0.60 deduction per square foot, an energy improvement must be made to the building’s interior lighting systems and improve energy use by 25%-40% or more. HVAC and building envelope improvements that meet the energy improvement threshold will qualify for $0.60 deduction per square foot.
    • Level 2: To qualify for a $1.20 deduction per square foot, an energy improvement must be made in two of the three types and improve the energy use by an aggregate of 33 1/3% or more.
    • Level 3: To qualify for a $1.80 deduction per square foot, an energy improvement must be made in all 3 types and improve the energy use by an aggregate of 50% or more.
  3. Not Just 3 Years of Amended Returns: The deduction is claimed via a change in accounting method for property owners, so it can be taken for construction or improvements as far back as 2006, the year the deduction was enacted.  

With government buildings, these benefits go to the primary designer (architects, engineers, lighting designers) of the energy efficient improvement since the government cannot use tax deductions. However, the primary designer must amend prior year tax returns to claim the deduction. Examples of government owned buildings are as follows:

  • Federal: offices, military bases, courthouses, post office, labs, etc.
  • State: offices, transportation facilities, state universities, courthouses, etc.
  • County, city, town, village, etc.: offices, schools, town halls, police, fire, libraries, airports, parking garages, etc.

Extender Status

One drawback to this deduction is that it is included in the package of tax rules commonly referred to as “extenders.” These provisions are not permanent. At this time, they have been extended through the end of 2014 and discussions are underway about extending them to the end of 2015 and beyond. So far, Congress and the President have found a way to extend this tax break every time it has neared expiration (or expired), but it’s hard to guarantee that will always be the case.

Support from a Strategic Partner

179D-customizable-sell-sheet Given the engineering expertise needed to verify the energy improvement, most accounting firms seek out a strategic partner to provide the studies that make it possible for a real estate owner to take this deduction. One thing to look for when evaluating a strategic partner is the level of support that firm will provide to you in your efforts to market this service. It’s reasonable to expect that a qualified partner should be able to provide printed and electronic materials that will help you sell this service to your clients and contacts. It’s much easier to explain the value of the service when you work with a partner that focuses exclusively on these types of deductions.


Tags: Section 179D, Jennifer Birkemeier, Energy efficiency tax deduction

Ask Your Clients These 5 Questions to Determine If 179D Is For Them

Posted by Jennifer Birkemeier on 9/30/15 8:58 AM

A Few Indicators Will Tell You If Their Deduction Will Be Worth the Cost of the Study

Energy_efficient_buildingWe spend a lot of time talking with CPA firms about section 179D and cost segregation studies. It’s a pretty great job to help accountants and their clients uncover substantial tax savings that they didn’t know were available or didn’t know how to claim. At the same time, we have to remind the folks that we talk with not to get too far ahead of themselves. It’s important to remember that the potential 179D deduction must be large enough to justify the cost of the study needed to claim it. Here are a few questions you can ask to determine if a client is in line for tax savings that warrant a study.

  • What type of improvements were made? Section 179D applies to energy efficient improvements made in 3 different categories:How big is the space? The deduction is calculated based on the square footage of the structure improved, so smaller spaces may not justify the cost of the study. Typically, 30,000 sq. ft. seems to be the threshold at which most Section 179D deductions exceed the cost of the calculation.

    • Lighting
    • HVAC
    • “Envelope,” which includes improvements to the shell of the building that make it more efficient, such as windows, roof, etc.  
  • How much did the work cost? The deduction is also limited to the amount spent on the improvements. It’s important to check the receipts before committing to the study in order to make sure that the potential deduction is large enough.

  • What are the energy efficiency ratings of the old materials removed and the new materials installed? The licensed engineer or contractor who reviews the improvements will make a determination based on the improvement in energy efficiency. The business needs to have enough information about the old and new materials to support that calculation.

The questions above apply to commercial property owners who have made or are considering making energy-efficient improvements to their properties. If you have a client or potential client that is an engineering or architectural firm, there’s a different question to ask that could uncover significant opportunities.

  • Do you serve government clients? If a government makes an energy efficient improvement to a building, it won’t have much use for a 179D deduction. However, the law provides some opportunities for an engineering or architectural firm that designs the energy efficient improvements to a government building to claim the deduction. If your firm serves these professionals, or if it would like to expand into this segment of the market, this is a great question to ask.  

As an accountant, you know better than most how to help a business evaluate the potential costs and benefits of any particular decision. When it comes to performing a cost segregation and claiming a section 179D deduction, these questions should help you make that evaluation quickly and accurately.

Tags: commercial real estate, Section 179D, Jennifer Birkemeier, tax saving opportunities

Is 179D Tax Deduction Right For Your Commercial Real Estate Client or Prospect?

Posted by Jennifer Birkemeier on 5/12/15 9:28 AM

Here are 3 pieces of data you need to tell if a 179D study will generate at least 10-to-1 ROI.

179D_tax_deductions_for_commerical_real_estateGreen is the new black, and chances are good that your commercial real estate clients and prospects have replaced windows, HVAC units, or lighting in the past few years with more energy-efficient models.
The status of the 179D tax deduction for energy efficient commercial buildings currently is in limbo for 2015 and beyond. However, this perennial “tax extender” is a popular one that enjoys broad support, and so it will most likely be implemented retroactively for the 2015 tax year.
Digging for just a few pieces of information now will allow you to see if your commercial real estate clients would benefit from this valuable tax deduction (up to $1.80 per square foot) that can generate ROI for the property owner of up to 10 times (or more) the cost of the study.
The pieces of data you will need to perform a 179D analysis include:
  1. Square footage of the building and the energy efficient improvement or addition.
Ask the client or prospect for architectural drawings of the buildings to get an accurate measurement of the overall square footage and the size of the addition or improvement. Generally, because 179D requires an independent certification by licensed engineer licensed and thorough modeling for each individual building, the building should be at least 30,000 square feet for the benefits to outweigh the costs of the study.
  1. Technical specifications on efficiency improvement.
Next, you will need the technical specifications about the energy efficiency of the new unit. The engineer will compare each building’s performance to government standards to determine if it reaches the required threshold of energy savings.
  1. Invoices for energy-efficient upgrades and additions.

Currently, the maximum 179D tax deduction is $1.80 per square foot for buildings that achieve the threshold of 50% energy and power cost savings for the whole building, or $0.60 per square foot for partially qualifying property. However, the deduction is capped at the taxpayer’s actual costs for the improvements. So to determine whether the deduction will or will not be worthwhile, you will need the client’s invoices for the improvement project or new building. 

Do the Benefits of 179D Outweigh the Costs?

Once you’ve gathered all these pieces of data, you can use the U.S. Department of Energy’s 179D calculator to estimate the potential tax savings for your client.
Buildings of at least 30,000 square feet that meet the government’s technical specifications typically generate ROI of at least 10 times the cost of the 179D study. However, since the lookback on this deduction goes all the way back to January 2006, commercial property owners that have performed efficiency upgrades over multiple years might see even better returns, in some cases closer to 20-to-1.
If you would like to evaluate your clients’ previous or upcoming building or renovation projects to determine whether they qualify for the 179D tax deduction, we can help. Contact us to schedule a consultation.

Tags: commercial real estate, Section 179D, Jennifer Birkemeier, tax saving opportunities

Execute on This Triple Play Opportunity Presented By Final Tangible Property Rules

Posted by Jennifer Birkemeier on 12/10/14 11:39 AM

As Senate considers tax extenders bill, learn how to use dispositions and removal costs to enhance tax savings of 179D.

Ever heard the saying that you must give to receive? During this season of giving, CPA firms can help owners of commercial property benefit from this phenomenon when they dispose of tangible property and, as a result, realize lowered tax bills and increased cash flow.

179D Energy Eficiency DispositionsIn fact, this holiday season could be a very happy one indeed if the Senate approves the tax extenders bill (Tax Increase Prevention Act) that passed the House by a wide margin on Dec. 3.

But even if that particular gift is delayed, commercial property owners still have a rare opportunity as a result of the interplay between the 179D federal tax deduction for energy efficient improvements to buildings and the new tangible property regulations. Read more about this triple play in our latest blog post.

Even in the unlikely scenario that Congress fails to extend 179D, your commercial real estate clients still can capture deductions (up to $1.80 per square foot) for energy efficiency improvements placed in service between January 2006 and December 2013.

But why stop there? For every building improvement, the property owner should dispose of old property. And thanks to the final tangible property regulations, those dispositions can result in significant tax savings.

How The Triple Play Works

Consider a hotel that upgraded its lighting to a more energy-efficient system in 2013. How do you turn that expensive renovation into a tax-saving opportunity?

First, you conduct an energy efficiency study and claim a deduction for the new lighting system—for lighting; the deduction is up to $.60 per square foot.

Next, you claim a loss on the disposition of the old lighting and recognize a tax deduction for the remaining basis in that asset. But this is a limited-time opportunity. The Revenue Procedure allows for making a “late partial disposition election” as a change in method of accounting for the 2012, 2013 and 2014 tax years only. So that means that once the property owner’s 2014 tax return is filed, the opportunity to look back to prior year dispositions is gone forever. Ignoring this limited-time opportunity could cost your client tens or even hundreds of thousands of dollars in potential tax deductions.

tangible property regs The final leg of this triple play is the potential opportunity to take a deduction for removal costs. When your client installed new lighting, that property owner most likely also paid to have the old lighting removed and hauled away. Using cost segregation methodology, you can identify removal costs that qualify for current tax deductions.

Recruit the Right Team

Executing a triple play takes skill and precision. Is your firm equipped with the engineering, tax and accounting expertise required to take advantage of these three tax-saving opportunities? Through our CPA Partnership Program, CSP360’s team of tax specialists, engineering professionals and accounting method specialists partners with CPA firms throughout the country. Contact us to learn how we can position you as a tax-slashing hero.

Tags: Section 179D, tangible property regulations, Jennifer Birkemeier, tax saving opportunities, CPA partnership program

3 Lessons for Building Your Commercial Real Estate Practice Using 179D

Posted by Don Warrant on 11/4/14 9:38 AM

Create urgency through the potential loss of millions in tax deductions—and align with a strategic partner who can execute.

commercial_real_estateIn last week’s post, we shared the story of how a CPA firm lured back a $50,000-a-year client using the 179D Energy Efficient Commercial Building Tax Deduction to recover more than $1 million in taxes.

The even more exciting news? This is far from an isolated incident. In our work with CPA firms throughout the United States, we have uncovered opportunities just like this countless times, positioning those CPAs to delight their clients with lowered tax bills and greater cash flow.

Here are our top three takeaways about how you can use 179D to build your tax practice:

  • 179D opens doors. Let’s face it: “We do a better tax return” as a marketing message just doesn’t cut it anymore (if it ever did). What commercial property owners really want is to free up cash flow for more profitable use, and engineering-based tax incentives are an ideal way to put that cash back in their pockets. While it is currently expired, 179D deductions may be available for prior years—all the way back to 2006, in some instances. For owners of as hotels, office buildings, retail stores and manufacturing facilities that have required updates to improve their energy efficiency, that lookback can represent a tax deduction of millions of dollars. And since most CPAs don’t have the knowledge or the engineering talent to complete a 179D study, working with the right strategic partner and educating your prospects about this potential windfall could propel you to the front of the pack.
  • Benefits of association. You probably know that qualifying for the 179D deduction requires an independent certification by an engineer licensed in the state where your client is based. Perhaps this seems like an insurmountable hurdle, but it doesn’t have to be. As the CPA in our 179D case study discovered, aligning with the right strategic partner (hmmm... are you seeing a pattern here?) that has the proper resources and personnel can provide all of the business-building benefits of 179D without having to undertake the permanent overhead and risk of bringing those resources in-house.
  • Limited-time offer. Good business developers know the value of urgency. And if your clients or target prospects are architects who design public schools and government buildings, then you have an urgent message to deliver, because the lookback available to those designers is just three years. As of right now, only green buildings and retrofits for government entities and schools performed in 2011 and later qualify for the deduction. And once the 2014 tax return is filed, 2011 will be off the table. For some architects and designers, those missed tax deductions can add up to millions of dollars. Make sure the designers of public schools and government buildings in your target market know that every day they delay a 179D study increases the chances that they are letting money slip through their fingers.

CSP360 Deep Dive Program Here’s the thing about creating a sense of urgency: You have to be prepared to execute. Before you start singing the song of the potential tax benefits of 179D, make sure you have the right resources to deliver those benefits. A strategic partner such as CSP360 equips you with the engineering tools and expertise you need to confidently bring this tax-saving message to market and build your tax practice with progressive, growing commercial property owners and architects. Contact us to learn more about how we can help you spot 179D opportunities in your current client base and with your target prospects.

Tags: commercial real estate, Section 179D

How A CPA Firm Lured Back A $50,000 Architect Client With $1 Million in 179D Deductions

Posted by Don Warrant on 10/28/14 9:24 AM

Impressed by tax savings for energy efficient designs of public buildings, client re-hires firm for tax planning and compliance work.

179D_DeductionsImagine that you are a business owner who just realized that you missed out on hundreds of thousands of dollars in tax deductions that you could have claimed as a result of building or designing energy-efficient buildings. How would you feel about the CPA firm that let those opportunities pass you by?

Now imagine that you are the CPA who educates that business owner about how she could realize those tax savings and redirect that much-needed cash into her business operations. Do you think that success would help position you as the go-to provider for all of the firm’s tax planning and compliance needs?

The answer, of course, is YES! We have seen this scenario play out time after time. In fact, with CSP360 serving in the background, a Southeastern regional CPA firm recently won $50,000 in recurring work from a former client by educating the owner about how her architectural firm could claim current deductions for their designs of energy-efficient public schools and universities, as well as government and municipal buildings.

Here’s how this architect learned that she could slash her firm’s tax bill and free up cash flow using the 179D deduction:

The architect asked her (soon-to-be former) CPA about whether her firm could claim a deduction under 179D. The uninformed CPA assured her (falsely) that qualifying for the credit would be overly burdensome, and the firm would not be likely to reap significant benefit.

But that answer never fully satisfied her. So when she received an invitation to attend a U.S. Green Building Council (USGBC) chapter meeting about the 179D Energy Efficient Commercial Buildings Tax Deduction, she immediately accepted. Interestingly, the speakers included a representative from a regional firm that used to handle her firm’s tax and accounting work. She hadn’t realized that the firm was so closely aligned with the USGBC, and she was intrigued.

Yes, architects can qualify for 179D

What she learned at that 179D seminar surprised and delighted her—but it also disappointed her to confirm that her current CPA had really let her down! The presenters shared examples of dramatic tax savings achieved by designers of public school buildings—the very types of buildings that this architect had been designing for more than six years. They explained that the 179D provision had expired at the end of 2013, but that designers of public schools and government buildings can amend tax returns to claim tax deductions for buildings or retrofits from any open tax years.

She also learned that, while it is true that qualifying for the credit requires the designer of public buildings to obtain an “allocation letter” from the government agency that owns the buildings, as well as independent certification by a licensed engineer, these hurdles are completely manageable with a knowledgeable and experienced partner by your side.

Good news and bad news

This architect lost no time in meeting with the regional CPA firm and CSP360 to discover just how much she could recover using the tax deduction. She was not disappointed! After conducting a thorough analysis of the architect’s records and performing site visits, the tax and engineering specialists discovered that the architect qualified for a total of more than $1 million in tax deductions for public buildings designed in the past three years.

The bad news? The architect could have lowered her tax bill even more with tax deductions for previous years if only she had known about the opportunity sooner. Because designers of public buildings only qualify for a 3-year lookback window (taxpaying building owners can look all the way back to 2006), she had missed out on several hundred thousand in tax deductions for public buildings the firm designed prior to 2011.

The spectacular news for this regional CPA firm? This former client, who had left the firm for a competitor almost a decade ago, was so impressed with these tax savings that she re-engaged the CPA firm for all of her tax planning and compliance work, worth about $50,000 per year.

Are you missing out on opportunities to win new business with architects and designers of public buildings—plus owners of commercial buildings? CSP360 partners with CPA firms across the country to spot these opportunities and perform the energy efficiency certification required to qualify for the 179D Energy Efficient Commercial Building Tax Deduction.

Tax Slashing Hero

Tags: Section 179D

Act NOW on 179D Opportunities for Commercial Real Estate Owners

Posted by Don Warrant on 8/19/14 9:16 AM

Tax deductions for energy efficient upgrades plus dispositions of abandoned assets can add up to big tax savings.

tax_savingSo what ever happened to the EXPIRE bill—the one that would have extended the Section 179D Energy Efficient Commercial Building Tax Deduction through the end of 2015 and boosted the whole-building deduction to $3 per square foot? Sadly, it is mired in political quicksand, and the chances of any extender bill making its way through Congress before the November elections are about as good as a snowball’s chance in…well, you know.

But that doesn’t mean you should stop talking to your property-owning clients about 179D. In fact, now is an ideal time for your commercial property owners to capture deductions for past energy efficiency improvements made between 2006 and 2013. If your clients own hotels, restaurants, apartment buildings, manufacturing or distribution facilities, or other properties that require upgrades to improve energy efficiency, don’t forget about this valuable tax deduction.

263(a) Reviews Can Turn Up 179D Opportunities

As your firm is conducting its review of 263(a) repair vs. improvement costs, take some time to evaluate any lights, HVAC systems and exterior improvements that were performed between 2006 and 2013 and meet the criteria of the Energy Policy Act of 2005. An energy study conducted on those efficiency improvements could qualify the taxpayer for up to $1.80 per square foot.

What About Those Old Fixtures?

There is another potential tax-saving opportunity that could end up being even more valuable than the 179D deduction. An abandonment study conducted on the old lights or HVAC system that the client pulled out could more than double the size of the tax deduction that is available to offset either 2013 or 2014 taxable income.

For example, consider a hotel owner that spent $100,000 on a new lighting system for the 50,000 square foot building. Whereas the 179D deduction would be $30,000 (50,000 sq ft x $0.60), an abandonment study on the old lighting system could realize an additional deduction of about $60,000. That total deduction of $90,000 is a sure way to put a smile on that client’s face.

Of course, sometimes the best bang for your client’s buck will come as a result of expensing the cost as a repair, rather than going through the extra expense and effort of bringing in a qualified engineer to certify the property. Making the determination of how to treat building related expenditures requires deep expertise in these tax strategies based on an engineering foundation. CSP360 has the experience and knowledge you need to delight your commercial real estate clients with tax-minimization opportunities.

Contact us to find out how we can partner with you to spot opportunities in your client base to take advantage of 179D deductions or other tax-saving strategies.

Tags: commercial real estate, Section 179D, 263(a) repair and maintenance review, Don Warrant

Do Not Let These Cost Segregation Horror Stories Happen To You!

Posted by David Barrett on 4/14/14 9:29 AM

‘Twas a dark and stormy night…

cost_segregation_nightmareDespite the many benefits cost segregation can offer your firm and your clients, the specter of what can go wrong if you bring in a less-than-qualified provider can send a shiver down the spine of any CPA. 

Two recent high-profile cases—AmeriSouth and Peco Foods—ratcheted up the anxiety around cost segregation. Both AmeriSouth and Peco Foods relied on cost segregation studies performed by third-party consultants, and in both cases the IRS disallowed some or all of their positions. But the most alarming part of these cases is not that the IRS prevailed in court. (In the AmeriSouth case, the “defendants” failed to defend themselves at all, and the Peco cost segregation violated long-standing tax policy regarding the allocation of purchase price.) The truly scary part is that these cases have established precedence for the IRS to target similar businesses that use this legitimate and accepted method of accelerating depreciation.

CPAs who want to offer cost seg services can reduce their anxiety about offering this service by working with an experienced, reputable cost segregation specialist. On the other hand, by relying on an inexperienced firm, you could find yourself starring in your own cost seg horror story. For example:

  • You could be in the hot seat in the event of an IRS audit. Many cost segregation studies fail to stand up to IRS scrutiny because they use benchmarks to estimate percentages of costs that qualify for shorter depreciation lives (i.e., rule of thumb approach), rather than a detailed and well-documented engineering methodology. Remember: At the end of the day, if your client’s accelerated depreciation is disallowed and your cost segregation strategic partner cannot support the study with thorough documentation, you are liable.
  • Your client could miss out on significant tax savings. Because the rule-of-thumb approach does not rely on an in-depth analysis of actual construction or acquisition costs, the tax benefits are substantially less than those based on a detailed engineering analysis.
  • Your client might not be in compliance with 263(a). Since the IRS issued its final regulations regarding repairs and maintenance, no cost segregation can be considered complete without a review of compliance with the new regs. Budget providers of cost segregation services most likely will not offer this additional service.
  • Deadlines could be blown. Say it’s March 12 and you’re still waiting on the depreciation calculation from your cost segregation provider so that you can complete Schedules K-1 for the partners of a large real estate investment group. You are essentially held hostage—unable to move forward because of the failure of that subpar provider. But guess who the client will hold responsible?
  • Your client relationship could be damaged. Even in the event that the provider performs all the technical aspects of the engagement properly, he or she still could act unprofessionally, circumvent you, or divulge information (such as your firm’s markup on the job) that puts you in a position of having to defend your practices.

Cost Segregation Strategic Partner

cost segregation guide for CPA firms You can avoid these horror stories by aligning your firm with a reputable cost segregation specialist. Backed by deep engineering and tax expertise, the right cost segregation strategic partner will perform an in-depth study backed by thorough documentation that will withstand an IRS audit… and bring significant tax benefits to your clients. That strategic partner also should act as an extension of your firm at all times.

Backed by the resources of Buffalo, N.Y.-based Top 100 firm Freed Maxick, CSP360 partners with CPA firms to offer private-label cost segregation studies that withstand IRS scrutiny while lowering your clients’ tax bills. Contact us or call (800) 591.0148 to schedule a consultation about our CPA Partnership Program. 

Tags: cost segregation, Section 179D, tangible property regulations, David Barrett

179D on Steroids: Bigger, Better Deduction for Energy Efficient Buildings Could Be Around the Corner

Posted by Jennifer Birkemeier on 4/10/14 9:22 AM

Would your clients benefit from a $1.80 to $3 per square foot increase?

Spoiler alert: the answer to this question is YES!

A Senate tax proposal passed on April 3 would extend and significantly enhance the 179D tax deduction for energy efficient commercial and multifamily buildings. If this proposal (or a similar one) makes it through the House, then it could make the construction of energy-efficient commercial buildings significantly more attractive for many more of your CPA firm’s clients.

In addition to making the deduction effective from Jan. 1, 2014 through Dec. 31, 2015, the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act also boosts the maximum whole-building deduction to $3 per square foot, up from the current $1.80 per square foot.

Below, you can see the impact this proposed increase would have for a commercial property owner considering constructing a new energy efficient 100,000 square foot building. (For this example, we assume that the property owner is in the highest tax rate bracket.)

100,000 sq ft building placed in service in 2013

calculator_money100,000 sq ft x $1.80 = $180,000 deduction

Tax ($180,000 x 39.6% tax rate) = $71,280

Net tax benefit ($180,000 - $71,280) = $108,720, or $1.09 per square foot


100,000 sq ft building placed in service in 2014

100,000 sq ft x $3 = $300,000 deduction

Tax ($300,000 x 39.6% tax rate) = $118,800

Net tax benefit ($300,000-$118,800) = $181,200, or $1.81 per square foot

The bottom line is that the proposed increase boosts the net present value of the deduction by 80%, providing greater incentive for property owners to undertake construction of new energy-efficient commercial buildings.

Other factors that make energy efficient buildings more attractive to property owners include:

  • Hiring a qualified engineer to certify the property has become more affordable due to efficiencies and increased competition.
  • The requirements of the tax law have changed, making it likely that more building owners will qualify for 179D.
  • The EXPIRE Act would allow nonprofit building owners and tribal government building owners to allocate the incentive to a designer. Previously only federal, state and local government building owners were able to re-allocate the deduction.

All of these factors combined with an increase in the tax deduction make energy efficient commercial building construction dramatically more attractive for a wider cross-section of your clients.

For more information on how to grow your top line and delight your clients with 179D and other engineering tax credits and deductions, subscribe to CSP360’s blog, The Radius, or call Jenn Birkemeier at (800) 591.0148.

Tags: Section 179D, Jennifer Birkemeier

Use Accelerated Depreciation and Expensing to be a Tax-Slashing Hero

Posted by Jennifer Birkemeier on 3/31/14 1:30 PM

3 critical questions that could put cash into the pockets of your 2013 tax extension clients.

cost segregationOuch! That pinch you just felt is the tax bite that your clients are experiencing right now. Between the 39.6% top federal tax bracket and the 3.8% Medicare tax, 2013 was a rough year for most clients on the tax front.

If you’re like most CPAs, you’re scrutinizing all those extended corporate and partnership returns, wracking your brain for new ideas to shave a few dollars off that tax bill. And with the deadline for 2013 payments right around the corner, you’re starting to feel the heat.

We have good news for you. Here are three questions you should ask your clients on extension right now that can uncover opportunities to slash their 2013 tax bills and position you as a hero in their eyes.

Have you purchased, constructed, expanded or remodeled a building since 1987 with a cost basis of $500,000 or more? Perhaps your client didn’t see the benefit of a cost segregation study in the past. But with a hefty tax bill waiting in the wings, the benefits of a cost seg study can look pretty tantalizing. We find that the tax savings is generally at least 10 times the cost of the study.

Did you perform any green energy improvements to your commercial property between 2006 and 2013? The cost-saving and goodwill benefits of energy efficiency mean that most commercial real estate owners have made some improvements to lighting, windows, HVAC or insulation. While the fate of the 179D Energy Efficient Commercial Building Tax Deduction is still hanging in the balance for 2014, projects placed in service between 2006 and 2013 are eligible for a top deduction of $1.80 per square foot.

Have you made any improvements or repairs to a commercial building or other tangible assets? Under the newly effective “repair” regulations, a much larger number of repairs and maintenance, including many renovation activities, qualify for current expensing. A 263(a) repair and maintenance review can uncover a wealth of previously capitalized expenses that now qualify for current deductions. In fact, the tax savings typically add up to 20 times the cost of the study.

cost segregation guide for CPA firms Want to know the best part? Each of these methods qualifies as an automatic Change in Accounting Method reported on Form 3115—so all of the tax savings realized for previous years can be claimed on 2013 tax returns. That means you can ease the sting of the tax bite while helping your clients free up that cash for strategic growth activities.

Let the engineering and tax specialists of CSP360 help position you as a tax-slashing hero. Contact us or call (800) 591.0148 to get started.


Tags: cost segregation, Section 179D, 263(a) repair and maintenance review, tangible property regulations, Jennifer Birkemeier

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