Ever Considered a Cost Segregation Study?

Do you own your practice building? If yes, ever consider a Cost segregation study?

Cost Segregation is a strategic tax savings tool that allows companies and individuals who have constructed, purchased, expanded or remodeled any kind of real estate to increase cash flow by accelerating depreciation deductions and deferring income taxes. In general, it is easy to identify furniture, fixtures and equipment that are depreciated over 5 or 7 years for tax purposes. However, a Cost Segregation study goes way beyond that by analyzing construction costs that are usually depreciated over 27 ½ or 39 years. The main goal of a Cost Segregation study is to determine all construction-related costs that can be depreciated over 5, 7 and 15 years. For example, 20% to 50% of the total electrical costs in most buildings can qualify as personal property (depreciated over 5 or 7 years). Reducing tax lives results in accelerated depreciation deductions, reduced tax liability, and increased cash flow. Any structure used for business or as rental property can benefit from a Cost Segregation study.

There are several benefits to a Cost Segregation study. One, it generates an immediate increase in cash flow through accelerated depreciation deductions. Two, it reduces income taxes and creates an opportunity to claim “catch up” depreciation on assets previously misclassified.

The ideal time for a Cost Segregation study can vary depending on a client’s tax situation. At William Vaughan Company, our team of experts work together with clients to recommend the best tax planning solution to fit their needs.

How to Use Year-End Numbers for Your Dental Practice

Now that you have final numbers for 2013, it is a good time to sit down with your CPA to review your practice’s financial standing to prepare for the new year. From your year-end financial statements, you can compare fluctuations in your practice from year-to-year as well as provide a benchmark to compare with industry statistics. These numbers really tell the story of your practice. They tell how you choose to operate your practice, what worked and what did not.

Watch your business by tracking key statistics such as collections, adjustments, new patients and accounts receivable aging.

Looking at your revenue stream, it is a good time to review the insurance providers your practice accepts. Review how quickly they reimburse you, how much extra work do they create and are there other providers that should be considered. Your practice manager’s input may be valuable to help determine which carriers remain.

This would also be a good time to discuss specific issues within the practice, from business procedures to routine office policies and employee problems to potential hiring of additional staff.

Other questions you may need to address might be: What changes are anticipated within the practice in the coming year? Are rental or lease agreements expiring? Are you planning any large purchases? Are there any regulatory changes or retirements of key personnel on the horizon? Are there any plans to acquire another practice or potentially sell the practice?
Envision what success looks like in 2014 and set goals and a develop a plan how to achieve them.

Long-Term Borrowing

Are you considering long-term corporate borrowings later in 2013 or 2014? If so, you might want to close on the financing before legislation could be introduced that would potentially reduce corporate interest expense, allowing you to benefit from any possible grandfathering of the interest expense deduction.

In order to affect “revenue neutral” corporate tax reform, as called for by both the President and the House Ways and Means Chairman, the highest marginal corporate tax rate of 35% would be reduced and some corporate tax expenditures may be reduced or eliminated. Interest expense is one of the leading corporate tax deductions. If revenue neutral corporate tax reform is enacted, corporate interest deductions may be reduced.

Historically, the tax treatment of taxpayers who have already incurred expenses, has been grandfathered by Congress and those expenses have been allowed. Therefore, if you are considering long-term borrowing, sooner may be better than later in order take advantage of current tax benefits.