Cost segregation is an IRS approved method of accelerating depreciation on your commercial and/or residential investment property by re-classifying components from real property to personal property. This process allows the assets to be depreciated on a 5-, 7-, or 15-year schedule instead of the traditional 27.5- or 39-year depreciation schedule of real property. If you happened to have purchased or built a property after September 27, 2017 then you might qualify for 100% bonus depreciation on assets with class lives less than 20 years old. That went in to effect with the Tax Cuts and Jobs Act of 2017. If you’ve owned your building prior to that date, we can still help you as well with saving money on your income taxes. We typically see an income tax savings of $30,000 – $70,000 per million in building basis. There is a range because some buildings are highly finished with 5 years and 15 year property and others might be more bare bones construction. Be sure to check out my blog on the topic at Cost Seg Building.
If you have a building with a basis over $200,000, we should at least have a conversation. We can run a no-cost, no obligation estimate for you that you can then discuss with your tax adviser as to whether or not it makes sense to go forward with such a study. As I talk with building owners across the country, my experience is that some 80-90% have not heard of a cost segregation study and how it can help them increase cash flow and save money on taxes. This can also boost investment returns by maximizing depreciation and minimizing the tax burden. It seems that owners of buildings say north of $15 million or so more often than not are familiar with cost segregation and in fact are using it with their building purchases. Most of my work is with building owners who own a $500,000 – $5 million building. They don’t necessarily have lots and lots of excess capital so if they can save $20,000 – $200,000+ in income taxes, they like knowing about this.
We will work with your CPA or tax advisor to make sure this gets implemented property on your taxes. We are happy to answer any questions you or your tax counsel might have for us. We have conducted more than 25,000 of these studies successfully all across the U.S. and on nearly every building type imaginable. Our studies have worked every single time.
What’s the process? We send you an estimate after knowing a little bit about your building. We don’t need to ever see your tax returns. That’s between your and your tax counsel. If you think after reviewing the estimate that it’s a good return on your money, then we sign a contract to do the work. 50% will be due up front with the remainder upon completion. We send someone out to do a site survey….take notes and pictures of all aspects of the building’s interior, mechanicals, exterior, landscaping, lighting, parking lot, signage etc. If you happen to have a survey, appraisal or AIA form for remodeling we’ll need that. If you have owned the building for more than one tax year, we’ll need the depreciation schedule. If you purchased it within the past year and haven’t filed taxes since owning it, then we’ll need to see your closing statement. We’ll also need a value for the land and that needs to be deducted from any amount we will analyze since land cannot be depreciated. We get all of this to our team and they get to work. It typically takes 7-8 weeks to get the study completed once we have all the documents. Please plan accordingly so that we don’t miss any deadlines. We watch this very closely so as not to miss those dates.
What kinds of buildings might be applicable for such a study? All kinds…. retail, industrial, commercial, office, strip center, grocery store, hotel, storage, warehouse, residential investment, duplex, four plex, apartments, Airbnb, fast food, mixed use etc.
I’d be happy to talk with you further. Please feel free to reach out to me if you have questions and would like to discuss.
John Murphy, National Account Executive with Cost Segregation Services, Inc. / 864-276-1448
