Casualty loss tax deductions can generate massive casualty loss may occur as result of a flood, hurricane, tornado, mudslide or other natural disaster. The intuitive thought pattern is: "My apartment complex by worth $ 5,000,000 suffered major damage totaling $ 1,500,000 for the repair and loss of income. Fortunately, I was completely covered by the physical damage and loss of income, other than small deductible. Apparently, there is no casualty loss you can claim as a tax deduction, right? "
Tax deductions are the basis for the tax reduction. Tax deductions reduce taxable income, but not directly reduce federal income taxes. For example, $ 100,000 of tax deductions reduces federal tax by $ 35,000 ($ 100,000 x 35%), assuming 35% tax. Most tax deductions require a cash expenditure (labor, materials, supplies, utilities, etc.). A stream period cash expenditure is not required for certain deductions of property taxes and can not be required for a casualty loss. Most real estate owners and investors do not take into account the losses of loss, a source of tax deductions. Few investors claim the victim tax loss deduction of federal tax code allows. We will review the criteria for a casualty loss tax deduction and thinking process regarding the acquisition of a property that has incurred a loss. The property owners suffer a casualty loss when the market value immediately after the disaster, most insurance benefits is less than the market value immediately before the accident. The complex issue is how the value of the property immediately after the incident. Consider a 1-story suburban office park in Mississippi which suffered 3-feet of flooding due to Hurricane Katrina. Let's further assume: 1) Sheet rock 8 meters should be replaced throughout the building for reconstruction, 2) although the property was 90% occupied before the flood, occupancy is expected to only 5% while rebuilding occurs, 3) stabilized occupancy after renovation is unclear, because some firms can not return, 4) construction will take 12-18 months due to work constraints and 5) the owner has casualty insurance to rebuild but has not loss of income / business interruption insurance. Clearly the market after the victim is less than the market value of value before the victim lower construction costs. Other factors to consider are: loss of income, market risk that not enough tenants will be available after completion construction, the cost of construction management, an illiquid market with few buyers right after the incident, the risk of construction, the interest rate risk (rates could increase during the construction period negatively affecting the value), the risk that operating costs could increase during the construction period (perhaps insurance) and compensation for entrepreneurial effort to induce a buyer to coordinate labor capital, management and compensation for the capital in rebuilding and release process. A careful analysis by an appraiser can show the improvements have no value after of flooding. For assignments of evaluation by the writer, a casualty loss of 10-30% of the market value before the accident occurred (in a straight-forward, the analysis of defense) is typical. This can cause a significant loss of victims (and taxes). For example, a property with a market value of $ 5,000,000 suffers a casualty loss 30%. While the victim is a major difficulty for the owners, the X $ 1,500,000 ($ 5,000,000 30%) tax deduction to mitigate the financial loss. Congress provided a casualty loss tax deduction to encourage investment in real estate. If you have the misfortune to suffer a casualty loss, take the helping hand given by the Congress and take the tax deduction. Right click here for a FREE preliminary analysis of the savings income tax on your property. Cost segregation produces tax deductions and reduces federal income taxes across the country and the size of each market. Below are just some examples of cities where cost segregation generates significant tax deductions. City:
- Memphis, TN
- San Francisco, CA
- New Orleans, LA
- New York, NY
- Hartford, CT
- Las Vegas, NV
- Los Angeles, CA
- Atlanta, GA
- Orlando, FL
- Miami, FL
- Louisville, KY
- Salt Lake City, UT
- Boise, ID
- Lakeland, FL
- Wichita, KS
- McAllen, TX
- Columbus, OH
- Lauderdale, FL
- San Antonio, TX
- Durham, NC
- Allentown, PA
- Youngstown, OH
- Little Rock, AR
- Greensboro, NC
- Greenville, SC
- Kansas City, MO
- Raleigh, NC
- San Jose, CA
- Palm Bay, FL
- Honolulu, HI
Cost segregation produces tax deductions for virtually all property types, including: Property Type:
- Regional Shopping Center
- Station Service
- Pharmacy
- Night Club
- Supermarket
- Racquet Club
- Auto Service Workshop
- Hangar
- Nursing home
- Subsidized Housing
Almost all industries including the following, can generate tax deductions costs through efficient use of cost segregation. Industry:
- Wholesalers, nondurable good
- Durable good wholesalers
- Day care services
- Computer and manufacturing e
- Health facilities
- Chemical manufacturing
- Printing activities
- Warehousing and storage
- Electronic and appliance stores
- Manufacture of clothing
O'Connor & Associates is a nationwide provider of commercial real estate consulting assets, including cost segregation studies, due diligence, the income taxes, abandonment studies, business valuations of personal property, commercial assessments, studies Feasibility Analysis of highest and best use, and lease audits.
Our services benefit owners of all types of commercial properties, including multifamily housing, retail stores, hospitals, hotels, industrial properties, factories, medical offices, commercial offices, restaurants, self-storage units, shopping malls, shopping plazas and warehouse / distribution centers.
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