Tax Reduction and Cost Segregation – Myths and Facts

Tax tips and tax help to assist taxpayers by describing options for tax reduction and tax cuts through lawful tax deductions.

Tax reduction and tax deferral are both generated by cost segregation. However, this tool is not well understood by most real estate investors and by many tax preparers. The root cause of limited understanding regarding cost segregation and how it provides tax reduction is limited dissemination of factual data on the subject.

The most prevalent myths include:

  • Cost segregation does not provide tax reduction, only tax deferral.
  • Cost segregation is too expensive. It only works for properties with a cost basis of $10 to $20 million or more.
  • Cost segregation is risky; it is a tax shelter likely to cause an audit.

All three myths are simply incorrect.

Cost segregation provides tax reduction by converting income which would have been taxed at the ordinary income rate (35% maximum) to income taxed at the capital gains rate (15% maximum). During the ownership period, cost segregation generates additional depreciation real estate investors can use to shelter income from the property or other sources. In many cases this income would have been taxed at 35%.

Upon sale, the property owner and tax preparer will collectively allocate the sales price. In most cases, short-life property such as carpet, vinyl tile and paving have depreciated and the market value of these assets (at the time of sale) equals their depreciated cost basis. In this event, the additional depreciation is taxed at the capital gains rate. Hence, the real estate investor gains both tax reduction and tax deferral.

Cost segregation used to cost $20,000 to $50,000 per property and was only financially feasible for properties with a cost basis of at least $10 million. However, fees for cost segregation studies are now much lower. It generally makes sense to order a cost segregation study if the cost basis of improvements is at least $500,000. In most cases, the first year tax reduction is at least two to four times the fee for the study.

The myth about cost segregation studies being a risky scheme is completely inaccurate. A properly prepared cost segregation study is encouraged by the IRS since it generates more accurate accounting. The Audit Techniques Guide is a 100-plus-page manual regarding the background and proper methodology for a cost segregation report.

Both the advisors and appraisers (who perform cost segregation studies) have studied and understand the Audit Techniques Guide. Cost segregation studies are encouraged by the IRS. In private correspondence, IRS staff has indicated a cost segregation study does not increase the change of an audit.

If you are a real estate investor or use real estate in your business, ignore the myths and obtain a free preliminary analysis to determine if you could benefit from a cost segregation study and increase your tax reductions and tax deductions.

Cost segregation produces tax deductions and reduces federal income taxes across the country and in every size market. Below are just a few examples of where cost segregation generates meaningful tax deductions.


  • Philadelphia, PA
  • Boston, MA
  • Denver, CO
  • Memphis, TN
  • San Francisco, CA
  • Tampa, FL
  • Hartford, CT
  • Atlanta, GA
  • Miami, FL
  • Orlando, FL
  • Allentown, PA
  • Harrisburg, PA
  • Lancaster, PA
  • Greenville, SC
  • McAllen, TX
  • Tulsa, OK
  • Charleston, SC
  • Chattanooga, TN
  • Palm Bay, FL
  • Oxnard, CA
  • Madison, WI
  • St. Louis, MO
  • Columbia, SC
  • Lakeland, FL
  • Youngstown, OH
  • Knoxville, TN
  • Detroit, MI
  • Columbus, OH
  • Des Moines, IA
  • Cincinnati, OH

Cost segregation produces tax deductions for virtually all property types.

Property Type:

  • Fast food restaurant
  • Department store
  • Auto dealer
  • Convenience store
  • Service center warehouse
  • Self-storage
  • Drugstore
  • Land
  • Multifamily
  • Medical facility

Almost every industry, including the following, can generate cost-efficient tax deductions by using cost segregation.


  • Automotive parts distributors
  • Frozen food manufacturing
  • Apparel manufacturing
  • Electrical component manufacturing
  • Plastic and rubber products manufacturing
  • Publishers
  • Textile product mills
  • Building supply dealers
  • Wood product manufacturing
  • Golf courses and country clubs


The Beginners Guide to Real Estate IRA Investing

Are you looking to learn more about purchasing real estate in IRA accounts?  Wondering what the whole process is like?  This article will go over this exact process and what you can do to get the best return on your investment as possible.

For starters, in order to take part in real estate IRA investing, you must convert your current IRA (or rollover the funds from another investment vehicle like a 401k) to a self directed IRA.  With a self directed IRA, not only do you have more investment options to choose from, but you also have full control over what your funds are invested in. 

Here are the next steps you must take in order to profit from real estate IRA investing:

1.  Find a good custodian that will walk you through the whole process of IRA real estate investing.  There are a lot to choose from, so make sure you get one that can help you the most.

2.  Your custodian will help you set up an LLC inside your IRA, which will be the entity that purchases the real estate properties of your choice.

3.  Locate the right kind of deals- ones that you can purchase well below the current market value.  This way, you can make a better return on your investment.

4.  Hire someone to make all the necessary repairs and renovations to the property.

5.  Find a qualified buyer to purchase the house from you or find tenants to rent out the property.  This usually requires help from a realtor, especially if you don’t know much about real estate.

**All expenses that are incurred having to do with the real estate in IRAs need to be funded by your account.  Likewise, all profits made with your investment must be put back into your IRA.**

As you may have guesses, this process can be complicated if you don’t know what you’re doing.  And sadly, this is why many people refrain from taking part in real estate IRA investing.

However, I know of a “hands-off” approach that makes real estate IRA investing easier and more profitable than ever.  It involves utilizing the knowledge and experience of a well-established company that specializes in real estate IRA investing.  Not only do they specialize in purchasing real estate in IRAs, they are also the creator of a very socially conscious program that’s mission is to rehab neglected urban areas.  While they provide very generous returns for their investors, they also create livable homes for hard-working middle class families.

How would you like to double, or even triple the returns your getting with your current investment strategy by being part of a program like this that requires very little work on your part?

What if you could forget about finding your own custodian, locating the best real estate deals, repairing and renovating the property, and even finding qualified buyers or tenants to occupy the real estate in your IRA?


Marketing Writing – How Specific Does Your Target Market Need to Be?

One major problem with writing a target market description is failing to make it specific enough. If you use generalities in your marketing writing, your writing fails to connect because your readers do not identify with the description. They feel no “ping” of recognition when they read your words. You won’t grab their attention or engage their interest. Your description does not stand out in any way. The marketing writing does not arrest and engage your market. Your intended target is not compelled to read further. Click of the mouse and they’re gone from your website writing. The question then is, “How specific does your target market need to be to engage and hold their attention?” Here are a few ideas.

1. It must be specific enough that you can clearly distinguish a member of your market from everyone else.

When you are in a group of prospects, does the information in your target market description clearly identify a target prospect from others? The more “instant” the recognition, the more clearly you have delineated your market. If you don’t feel immediate certainty, your target needs to be more specific.

2. It must profile recognizable and real people with identifiable problems.

It’s easy to get off into imagining a market that does not exist. We’d all like hordes of potential clients anxious to throw money at us and claim the honor or working with us. Instead of indulging such flights of fancy, keep it real. Be sure that your target market contains no fantasy aspects or wishful thinking. Stay grounded. Identify real people and real problems.

3. Your target market must have an identifiable need, and the budget and willingness to solve their problem.

Many business owners make the mistake of aiming for a market where empathy or misplaced compassion drives the need to “help” those who will not or cannot afford to help themselves. Be sure your target includes financial specifics such as, “They have a budget and need for my services.” or “My market recognizes the necessity of investing in marketing services.”

4. You must understand the specifics of their psychological makeup.

How does their problem affect them emotionally? What motivates them to seek a solution? When you get “inside their head”, what compels them to consider your solution? What are the drivers? Include all psychological components that you recognize and understand. Perhaps they are driven by fears or insecurities. Include these.

5. You must understand the specifics of what your target market wants when they get their problem solved.

This doesn’t mean only the solution itself (features of the service) but also what they want to experience once they have the solution (benefits). This would be things like “freedom from X”, “time for family”, and “relief from worry and stress”. Here is where your considerable experience in working with your target market will be evident in the information you provide in your marketing writing.

6. You need to be demonstrate your understanding about how your target market thinks.

If you could hear their thoughts, what would you discover? What would arrest their normal behavior and have them suddenly give your writing their full attention? What are the “grabbers” that they would respond to? What do they need to see and hear? Dredge your memory for those things that satisfied clients revealed to you once their problem was solved. Describe these revelations of innermost thoughts and feelings and you will have the “magic elixir” to attract your target market.

7. You must be specific enough to know where you can locate your target market.

If you know who they are, you should be able to identify where they are. Where do they show up? Where do they congregate? What are their associations and affiliations? How could you access a aggregations of your target market? If you don’t yet understand the specifics of this, you don’t yet understand all the specifics of your target market. The more clearly defined your market is, the more obvious it becomes to you where you will find them.

It’s critical that you become very specific about your target market. Most business owners, when they define their market, believe that they have does a great job of describing it, but typically, they’ve only scratched the surface. The only way to have an effective target market, is to be very specific.


The Cost of Payday Loans

You need a cash advance immediately, but are too shy to ask relatives or friends, and are scared of the paperwork involved in a bank loan. Shed all your worries, for help is a mouse click away in the form of payday loans. Payday loans are one of the most convenient ways of getting a cash advance today with practically no paperwork or other hassles.

Defining Payday loans

Payday loans are a short-term cash advance, when it is needed the most…usually between paydays! Payday loans are a great way to get some cash to tide you over to your next paycheck. The goal of payday loans is to assist you with finances to meet that unforseen requirement. The money is given as a cash advance and is directly deposited into your personal checking account, after which the cash advance funds, plus a fee, are taken out of your account at the end of the loan which usually is your next payday.

However, a payday loan is no substitute for long-term financial planning. This cash advance should only be taken to meet urgent financial needs until your next payday. It is only in emergencies that payday loans come in handy. Payday loans also bail you out of situations of bounced checks and late payment penalties by making the appropriate cash advance available.

Understanding The Cost Of Payday Loans

Forewarned is forearmed! So it is with payday loans. If you know what this kind of cash advance will cost you, you will be in a better position to weigh the pros and cons of opting for it. This way you will also know exactly what amount you need to pay back to the payday loan companies.

Your first step should be to find out the best rate of payday loan on offer. Whichever payday loan company you may choose you must know what will be the fixed amount that you will owe upon completing your payday loan.

Usually most payday loan companies charge around $20 to $30 per $100 of cash advance. To ensure that there are no ambiguities, insist that your final payday loan amount is spelled out in dollars and cents. This will help you know what you need to pay, when your payday loan is due.

To judge the best deal, go for the payday loans company that is offering a lower APR. Usually, most payday loan companies provide a cost-breakdown per 100-dollar increments that coincide with the rate.

Furthermore, most payday loan fees are based on the duration of the cash advance. The standard APR for most companies falls into the 400 percent range. As an example, suppose you were to borrow $100 at a fee of $20 for a 2 week period and if you did not pay if for a year, your service charge would be $520 for a 520% APR. To which you need to remember to add the original $100 that you borrowed.

There may be a situation where you are unable to repay the full amount of the cash advance to the payday loans company. In such a situation, the payday loans company generally charges the payday loans finance fee and defers the principal payment over a longer period of time, usually another 14 days.

The Other Hidden Costs

There are several hidden costs in a payday loan! Remember, if you are unable to pay this cash advance and you happen to lose your job, the clock does not stop. If you default on the cash advance, which includes the principal plus interest, the payday loan company will reclaim the entire amount plus all the interest accrued on this loan. A payday loan company may exercise a number of options to collect this cash advance:

·Sue you for the funds.

·Use a collection agency.

·Enter your details into a bad credit database which may limit your capacity to cash/write a check for commercial purposes.

·File a legal complaint for bounced-check charges that may leave derogatory information on your credit file.

By now, it should be clear that it is not prudent to go for payday loans without being aware of the repayment structure. To play it safe, make sure that the cash advance is repaid on time to the payday loans company. Read the fine print before you sign the agreement and understand the worst-case scenarios before deciding to take a payday loan. Once you understand the costs involved in obtaining a cash advance, you are a step nearer to fully enjoying the benefits of payday loans!