If your business is depreciating over a 30-year period the entire cost of constructing the building that houses your operation, you should consider a cost segregation study. It might allow you to accelerate depreciation deductions on certain items, thereby reducing taxes and boosting cash flow.

And under current law, the potential benefits of a cost segregation study are now even greater than they were a few years ago due to enhancements to certain depreciation-related tax breaks.

Fundamentals of Depreciation
Generally, business buildings have a 39-year depreciation period (27.5 years for residential rental properties). Usually, you depreciate a building’s structural components, including walls, windows, HVAC systems, elevators, plumbing, and wiring, along with the building. Personal property — such as equipment, machinery, furniture, and fixtures — is eligible for accelerated depreciation, usually over five or seven years. And land improvements, such as fences, outdoor lighting, and parking lots, are depreciable over 15 years.

Often, businesses allocate all or most of their buildings’ acquisition or construction costs to real property, overlooking opportunities to allocate costs to shorter-lived personal property or land improvements. In some cases — computers or furniture, for example — the distinction between real and personal property is obvious. But the line between the two is frequently less clear. Items that appear to be “part of a building” may in fact be personal property, like removable wall and floor coverings, removable partitions, awnings and canopies, window treatments, signs, and decorative lighting.

In addition, certain items that otherwise would be treated as real property may qualify as personal property if they serve more of a business function than a structural purpose. This includes reinforced flooring to support heavy manufacturing equipment, electrical or plumbing installations required to operate specialized equipment or dedicated cooling systems for data processing rooms.

Classify Property into the Appropriate Asset Classes
A cost segregation study combines accounting and engineering techniques to identify building costs that are properly allocable to the tangible personal property rather than real property. Although the relative costs and benefits of a cost segregation study depend on your particular facts and circumstances, it can be a valuable investment.

The Tax Cuts and Jobs Act (TCJA) enhances certain depreciation-related tax breaks, which may also enhance the benefits of a cost segregation study. Among other things, the act permanently increased limits on Section 179 expensing, which allows you to immediately deduct the entire cost of qualifying equipment or other fixed assets up to specified thresholds.

The TCJA also expanded 15-year-property treatment to apply to qualified improvement property. Previously this break was limited to qualified leasehold improvement, retail improvement, and restaurant property. And it temporarily increased first-year bonus depreciation to 100% (from 50%).

The Savings can be Substantial
Fortunately, it isn’t too late to get the benefit of speedier depreciation for items that were incorrectly assumed to be part of your building for depreciation purposes. You don’t have to amend your past returns (or meet a deadline for claiming tax refunds) to claim the depreciation that you could have already claimed. Instead, you can claim that depreciation by following procedures, in connection with the next tax return that you file, will result in “automatic” IRS consent to a change in your accounting for depreciation.

Cost segregation studies can yield substantial benefits, but they’re not right for every business. We can judge whether a study will result in overall tax savings greater than the costs of the study itself. Contact us to find out whether this would be worthwhile for you.

hands holding scale

Practicing law is a very serious business.  But that doesn’t mean there isn’t a lot about it that’s quite interesting, fun, and even sometimes funny.

Every once in a while, it is a good idea to step away from the solemnity of it all and think about the lighter side of our business. Accordingly, we’ve compiled the top 10 fun facts about lawyers and the practice of law.

#1: How many lawyers does it take?

There are currently 1.34 million lawyers in the United States. The entire population of the U.S. is 327,522,508. That means that there is roughly one lawyer for every 240 people in this country. With numbers like that, you wouldn’t think it would be so hard to find clients.

#2: The first lady … lawyer

The first woman in U.S. history to become a lawyer was an Iowan named Arabella Mansfield. She had to sue the State Bar of Iowa in order to sit for its bar exam – a privilege that had been exclusively reserved for males. Born in 1844, Ms. Mansfield passed the bar exam and was admitted to the Iowa Bar in 1869. Though the law had always been the province of men, women began to study and teach the law during Ms. Mansfield’s era because so many men were called off to fight in the Civil War.

#3: Out of the mouths of babes

Nearly 150 years later, another female is poised to shatter barriers within the practice of law. A 15-year old girl from Ohio named Danya Hamad is reportedly on track to become the youngest lawyer currently practicing in the United States. Ms. Hamad has modest goals. In her own words, “My goal is to become the youngest lawyer in America and from there I want to change the world.”

She will not, however, be the youngest lawyer to ever practice law in the States. That distinction belongs to a man named Stephen Baccus who graduated from Miami Law in 1986.

#4: That’s not fair

Since 2002, the Institute for Legal Reform has surveyed corporate litigators and senior executives to rank the litigation climate in each state within the U.S. The survey is aimed at determining the reasonableness and fairness of litigation practices. The five states that rank as the most reasonable and fair? South Dakota, Vermont, Idaho, Minnesota, and New Hampshire. And the least? Florida, California, Illinois, Missouri, and Louisiana.

#5: Any correlation?

Why Do You Need an IT Lawyer?

Interestingly, the state that was determined to have the most fairness and reasonableness in its litigation climate nearly has the fewest number of lawyers per capita of any state. Only Arizona and South Carolina have fewer attorneys per capita than South Dakota, which boasts just 22.2 lawyers for every 10,000 residents.

In case you’re wondering, the District of Columbia has the highest number of lawyers per capita. In fact, Washington, D.C. has 788.1 lawyers per 10,000 residents.

#6: Who said lawyers are dramatic?

There are a surprising number of celebrities who attended law school. Among them are John Cleese (Monty Python), Geraldo Rivera, Ben Stein, Gerard Butler, Jerry Springer, Ozzie Nelson (Ozzie & Harriet), Jeff Cohen (Goonies), and John Saviano (The Wonder Years). Imagine having your closing argument delivered by Geraldo and Jerry Springer!

#7: Worth their weight in gold

Lawyers in America earn vastly different salaries depending on where they live. While top attorneys are reportedly charging upwards of $1,500 per hour, that is certainly not the norm. Across the country, lawyer salaries are highly dependent on location.

The highest wages for lawyers are, not surprisingly, earned in California, New York, and Washington, D.C., where attorneys average $168,693 per year. The lowest wages for lawyers are in Montana, where attorney salaries average $83,330 per year. Per-hour rates also vary wildly within states. For example, in Arizona, attorneys in the Phoenix metropolitan area earn an average of $65.44 per hour, while lawyers across the state average just $49.22 per hour.

#8: How a bill becomes a law

Historically, lawyers dominated the Congressional halls. In fact, in the mid-19th century, nearly 80% of Congressional members were lawyers. Today, however, lawyers account for fewer than 40% of Congress people. History will tell us how that trend impacted lawmaking but the final analysis should be fascinating.

#9: Lawyering isn’t for everyone

Practicing law is such a labor of love. Law school isn’t easy, passing the bar exam isn’t easy, and practicing law is probably the hardest thing of all. Perhaps not surprisingly then, lawyers leave the profession all the time. Whether it is to become a pastry chef or a writer (guilty as charged), lawyers seem to find great success in other careers.

#10: They really love us

Factors to Consider if You Want to Become a Lawyer

Perhaps more than any other profession, lawyers seem to be disliked by the public at large. As it turns out, however, they hate us because they envy us. According to one study, the reasons people aren’t fond of lawyers are: (1) they’re smarter than everyone else; (2) they have their own language; (3) they are intimidating; and (4) they’re expensive. Taken separately, those aren’t really bad qualities to possess.

We hope you enjoyed our brief escape from the day-to-day practice of law. Time to get back to work.