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What Is Cost Segregation?
- An Engineering-based tax savings tool that allows Commercial Property owners to depreciate a new or existing structure in the shortest amount of time permissible under current tax laws.
- In a Cost Segregation Study (CSS), certain costs previously classified as 39-year (or 27 ½ yr.) depreciable life can instead be re-classified as personal property and depreciated over shorter time buckets (5, 7, or 15 yrs.)
There are five main approaches to cost segregation. One, however, is most preferred by the IRS.
- Detailed Engineering Approach - This is the preferred approach by the IRS. It is also the way we approach it since it also provides the most accurate and beneficial use of this kind of service
- Survey or Letter Approach
- Residual Estimation Approach
- Sampling or Modeling Approach
- "Rule of Thumb" Approach
“It is the most methodical
and accurate approach.”
and accurate approach.”
Doesn't my CPA already take care of this?
Many CPA's do know about cost segregation and apply the standard 39 year depreciation for the property. CPA's typically do not do the Detailed Engineering Approach because they do not know about it or do not have resources to do that type of approach. On average your CPA will help you save 5% - 7% on Cost Segregation, however, our approach averages between 20% - 30% savings.
What are the core benefits to Cost Segregation?
- Generates / Increases Cash Flow and Minimizes Taxes"
- Look back study allows for “catch-up” depreciation benefit to be taken in first year"
- Free up money for investments which allows for compounded growth"
- Opportunity to use cash to pay down debt and decrease interest payments
We did not do the cost segregation study when we moved in but have been here 10 years. Can our company still qualify for a cost segregation study?
Yes. Our team of cost segregation specialists have the ability to do a back study and apply an accelerated depreciation schedule for the property which can "catch you up" for the previous years. We often have conversations with CPA's that do not realize that this is possible.
Will my CPA still be involved in any of the process?
Yes. There are some forms that your CPA will need to prepare for you during the process. It is our goal to work closely with them to complete the process quickly and effectively.
Do I have to amend tax returns?
No. IRS Revenue Procedure 96-31 allows a taxpayer to file a form 3115 Automatic Change in Accounting rather than an amended tax return. This form can be used to fix depreciation as far back as 1987. Our team can help prepare the 3115 for you, if you wish.
Will this increase my chances of being audited?
Not according to the IRS. You are filing an automatic change in accounting method (481 adjustment) which the IRS has preapproved.
What if I do get audited?
Included in our service is complete Audit Defense.
What if I am unable to use the entire benefit / deduction?
Unused depreciation can be ‘carried forward’ up to 20 years so you can apply this to future taxable liability.
How long does this process take?
The majority of our clients see the project completed in less than 30 days, however, it can take up to 45 days depending on the size and scope of the project.
My company is interested in doing a Cost Segregation Study. Where do we begin?
You may contact our office directly or fill out our short contact for form. One of our Advisors will contact you within 24 hours; usually the same day. Visit our Contact Us page.