For Maximum Savings, Retailers Must Meet Tax Depreciation Deadline

In 2017, Congress passed what many consider to be the most significant piece of tax reform legislation in more than 30 years. While the act impacts virtually every industry, retailers in particular should pay close attention to certain provisions.

Perhaps most notably, the Tax Cuts and Jobs Act reduced corporate tax rates from 35 percent to 21 percent, effective beginning in 2018. 

With this, retailers taxed as a corporate entity that have extended their income tax returns for 2017 can take advantage of a one-time arbitrage of up to 14 percent. By performing a cost segregation study for tax year 2017, retailers can ensure they receive the largest depreciation savings possible. Cost segregation studies are a tax planning technique that examine commercial real estate assets to identify contained assets that are eligible for tax savings for a much shorter period than the traditional non-residential or residential assets.

To capitalize on the savings, it is imperative that C-corporations meet the October 15th, 2018 tax return filing deadline.

Because it normally takes between 30 to 60 days to complete a professional cost segregation study, there is still time to reap the maximum benefits of this one-time added tax depreciation. However, plans to undertake such studies need to be considered now.

Retailers structured as pass-throughs, such as S corporations, limited liability companies, partnerships or sole proprietorships, can receive a lower 2.6 percent permanent benefit. The deadline for pass-through entities is September 15, 2018.

For more information on the tax depreciation deadline, or to view a case study, read the full article here.