Frequently Asked Questions
Can you guarantee that I will save money?
Yes, if we suggest you move forward with a study, savings are there. We are 100% confident in our ability to predict savings. We guarantee every study. Should we not save you money, our work for you is free.
How much can be saved?
First-year depreciation can, in certain projects, be up to 100% of all project costs. After-tax savings on all building types typically ranges from 3-15% of project costs. Leasehold improvements can achieve over 20% savings.
What happens to unused 1st-year depreciation?
All depreciation that cannot be utilized rolls forward and is available in future years.
How do I know if cost segregation will work for me?
- A 10-minute phone call is all that is required for us to predict savings for you. However, you are likely to benefit from a study if you answer the four following questions’ Yes.’
- Do you own commercial real estate (exclusive of land) with a value of $500,000+, or do you own leasehold improvements valued at $200,000+?
- Have you owned these assets for less than 15 years?
- Will the owning entities owe income taxes this year, or within 3 years?
- Do you plan to own the assets for 3 years or more?
When should a cost segregation study be conducted?
Immediately upon purchase or placed in service (PIS) date. We recommend working with us in an advisory capacity, at no additional fee, before purchase or construction completion. Working together in this way allows us to provide advice that can increase your cost segregation study value. Studies are also advised on properties purchased or renovated up to 7 years ago.
What is involved in a cost segregation study?
- Typically, less than 30 minutes of the property owner’s time. Our work, however, includes the following:
- A review of all available building and site plans or the creation of working drawings when plans are not available.
- A review of all available cost information, such as AIA 702/703, receipts, and G/L Transaction Register.
- The site tour typically lasts between 3-6 hours, during which each room is documented separately, and all short life allocable items are photographically documented, resulting in approx. 100-500 photos.
- Engineering take-offs are created from the analysis of available records and site tour data.
- Tax court precedent is researched and cited for all property.
- All individual items are separately documented and accelerated.
- Tax Savings Schedules are created separately for both Federal and State Income Tax Returns.
What should I consider when selecting a cost segregation provider?
Many groups are jumping into cost segregation as awareness of the strategy grows. However, as more providers, with fewer credentials and less experience market their services, clients and their CPAs need to do more due diligence to confirm you will receive a quality study from a knowledgeable provider. For our detailed series of questions to compare providers, click here.
Does the company have tax experts that can help if my CPA has questions?
Yes. We are tax experts. Knowledgeable CPAs and their clients are our biggest fans. So, we focus intently on providing education and advice, particularly when tax law is changing more rapidly than ever before.
Will a cost segregation study create additional work for my accountant?
No additional work is created for your accountant when completing studies on the property during the 1st tax year of ownership. Should a study be completed on properties previously owned (lookback studies), the only additional work is the form 3115, which completes the change of methodology from straight-line depreciation to the methods used in the cost segregation study. The completion of this form requires less than 30 minutes time.
Why has my accountant not performed a study already?
Cost segregation is not a topic of study for the CPA exam. For this reason, few CPAs are knowledgeable about the strength of cost seg as a strategy or about how to choose a quality provider. Cost segregation requires engineering and niche tax education, as well as a great deal of apprenticeship learning to be able to provide quality, detailed studies. This is not something most CPAs undertake.
Your business CPA is a key partner in your financial health. You could say that he is your primary care physician, and cost segregation is your surgeon. Neither is better or more educated than the other; they provide different services which work together to keep your business healthy.
How long will it take to complete the study?
It is possible to complete a study in as little as one week. However, this is not the norm. Typical project timelines are six weeks. Much of the timeline is determined by the client’s availability for a site tour and the ability to provide necessary cost or engineering data, such as plans or depreciation schedules.
How long do I need to hold on to the property for cost segregation to make sense?
This is not a strategy for property’ flippers.’ The breakeven point is two years. We recommend a minimum 3-year hold time.
I plan on selling my property very soon. Does cost segregation make sense for me?
Cost segregation is a strategy when you plan to hold a property for three years or more.
Will the company be available if I get audited by the IRS?
We stand behind our studies and provide all audit support for free. Though cost segregation does not increase audit likelihood (according to the Journal of Accountancy), we are ready to assist you. We retain all photos, tour books, and computations and methodology files used to complete your report, should it be requested in audit defense.