A cost segregation study is an IRS-approved method that reclassifies commercial building components and improvements into their proper asset life categories for depreciation purposes. This reclassification accelerates the depreciation period! A shorter depreciation period results in INCREASED depreciation expense which LOWERS taxable income!
Originally cost segregation studies were only done by the big 10 accounting firms, on very expensive buildings and the studies themselves were tremendously expensive! That initial perception of cost segregation still lingers and that’s why building owners and CPAs don’t think about it or they still think it’s too expensive. The reality is engineering-based cost segregation is very affordable and the output from a cost segregation study is the foundation for even more tax savings in the future!
Only if you’re interested in keeping MORE of YOUR money! Increased depreciation expense means reduced reported income, which means less income taxes owed!
Amending previous year’s tax returns is not needed in applying accelerated depreciation! U.S. tax code allows taxpayers to “catch up” on depreciation that was not claimed from previous years (using a different method) through the filing of a “change of accounting” form. This does not affect previous years’ tax returns. We will prepare this change of accounting form (IRS form 3115) on your behalf so that’s one less thing your CPA has to do! Furthermore, recent U.S. tax code allows for the “catch up” entry to be recorded in the current tax year rather than over four years, as originally introduced!
I can provide a FREE, no obligation estimate of the tax savings on your commercial building, including our fee, so you and your tax advisor can evaluate both the cost and the net tax benefits.
YES, but not as a tax preparation fee. The fees for cost segregation can be deducted as an expense just like any other professional service you use (like an attorney).
Your property qualifies if you:
- Purchased, constructed, or remodeled property after December 31, 1986.
- Anticipate holding the property for at least five years.
We can provide a FREE, no obligation, cost segregation estimate with the following information:
- Purchase/construction price of building only (land value must be excluded)
- Month AND year the building was put in service
- Building renovation/improvement costs (total dollar amount put INTO the building after completion/purchase)
- Building address and description (example: one story building with warehouse/office space located at 23123 SH 249, Tomball, TX 77375 with 7,500 sq ft interior space)
While not required for an estimate, if the previous tax year’s depreciation schedule is available, that will make our initial estimate much more accurate!
Building components are generally classified for federal income tax purposes into three categories: (1) Tangible Personal Property, (2) Land Improvements, (3) Real Property
Each category has a different asset life and recovery method under the U.S. tax code. Our engineering-based cost segregation analysis is performed by personnel with in-depth knowledge of construction methods, materials, and building components to properly identify the building components and improvements that will be reclassified into the proper asset life to take advantage of accelerated depreciation.
Cost Segregation is a one-time study, but the benefits will be realized for years to come! By accelerating more depreciation expense earlier, you’ll have the tax benefit sooner and can use the savings in whatever way you choose! The final report from a study can be used in the future for even more tax savings!
It is best to have a study completed in the tax year the building or improvements are placed in service. However, the U.S. tax code allow taxpayers to “catch up” on the depreciation that was not claimed from the first day the property was placed in service without amending prior years’ tax returns.
The full study can’t be done until all construction costs are finalized, however, for projects not yet constructed, CSSI can provide a preliminary estimate of tax savings based on your construction budgets.
A study normally takes about 6 to 8 weeks from the time all the appropriate documentation is received from the building owner.
The studies are conducted by Cost Segregation Services, Inc (CSSI) based in Baton Rouge, Louisiana. CSSI is the nation’s premier company providing engineering-based cost segregation studies for U.S. commercial building owners.
CSSI has on-staff lawyers, tax accountants, and construction engineers to perform the necessary analysis and documentation that the IRS requires.
CSSI’s cost segregation personnel have the expertise in tax laws, court cases, and rulings on cost segregation, along with real estate development and construction experience to maximize your benefits. Over the last 18 years, CSSI has performed over 20,000 cost segregation studies nationwide and our studies have NEVER triggered an IRS audit! Our goal is to support your CPA or tax advisor with the most accurate cost segregation study results possible