"In general, a study by a construction engineer is more reliable than one conducted by someone with no engineering or construction background. However, the possession of specific construction knowledge is not the only criterion."     --IRS Cost Segregation Audit Technique Guide
 

Frequently Asked Questions

  What is a Cost Segregation Study?
Why haven't I heard of cost segregation?
Does my property qualify?
Can I benefit from a cost segregation study?
When should a study be done?
What information will be needed to complete a cost segregation study?
How does a cost segregation study work?
Why should I have a cost segregation study done?
How long does a cost segregation study take?
Will a cost segregation study trigger an audit?
Can a cost segregation study apply to buildings that are not yet constructed?
Why should I choose Cost Segregation Services, Inc.?

 

 

 

 

What is a Cost Segregation Study?
A cost segregation study is an engineering analysis that reclassifies or segregates real estate components and improvements between real and personal property in order to accelerate the depreciation periods from 39 and 27.5 years to 15, 7, or 5 years.

Return to top of page

 

 

Why haven't I heard of cost segregation?
Cost segergation was first applied and performed by major accounting firms with in-house cost seg departments on the largest properties of their most significant clients. One study originally cost upwards of $100,000 Cost Segregation Services, Inc. developed the methods and protocols to deliver this same service to commercial proeprty owners at very affordable rates. This means you can take advantage of this tax savings that was once only enjoyed by the owners of exceptionally large properties.

Return to top of page

 

 

Does my property qualify?
Yes, if you:
1) Purchased, constructed or remodeled property after Jan. 1, 1986
and
2) Anticipate hold the property for at least a few years.

Return to top of page

 

 

Can I benefit from a cost segregation study?
Yes. Let us provide the necessary data to your advisors to determine the potential tax benefits.

Return to top of page

 

 

When should a study be done?
It is best to have a study completed for the year the building or improvements are placed in service. However, IRS revenue procedures allow taxpayers to "catch-up" on the depreciation that was not claimed from teh first day the property was placed in service without amending prior year's tax returns. Furthermore, the IRS recently allowed for the "catch-up" period all in the first year rather than over four years when the Revenue Procedure 99-49 was first introduced. A cost segregation study can be performed on any property constructed, acquired or remodeled since Jan. 1, 1986.

Return to top of page

 

 

What information will be needed to complete a cost segregation study?
While each study differs, we generally request the following information, if available: 1) A current tax depreciation schedule. 2) Building cost information. 3) AIA Architectural cost data. 4) Change orders We can assist you in gathering the necessary data.

Return to top of page

 

 

How does a cost segregation study work?
Building costs are generally classified for federal income tax purposes into three categories, (1)Tangible personal property, (2)Land improvements and (3)Real property. Each has a different depreciation recovery period and method under the Modified Accelerated Cost Recovery System (MACRS). Our qualified engineers with in-depth knowledge of construction methods, materials and building components can perform a detailed analysis to properly identify the building components and improvements that will be reclassified to take advantage of accelerated depreciation.

Return to top of page

 

 

Why should I have a cost segregation study done?
Without a cost segregation study, your accountant will only be able to use straight line depreciation, 39 or 27.5 years. A cost segregation study provides your accountant with accurate information to establish 5, 7, 15, and 27.5 or 39 year depreciation schedules, which substantially increases tax savings in the earlier years of owning your property.

Return to top of page

 

 

How long does a cost segregation study take?
A cost segregation study performed by Cost Segregation Services, Inc. normally takes about 4 to 6 weeks from the time we receive all of the appropriate documentation.

Return to top of page

 

 

Will a cost segregation study trigger an audit?
No. A Cost Segregation Services, Inc. cost segregation study strictly adheres to the IRS Cost Segregation Audit Technique Guidllines. If the Cost Segregation Services, Inc. cost segregation study comes into question, a principal or engineer from Cost Segregation Services, Inc. will attend the audit without any charge.

Return to top of page

 

 

Can a cost segregation study apply to buildings that are not yet constructed?
No. However, for projects not yet constructed, Cost Segregation Services, Inc. can provide estimates on tax savings from you construction budgets. A Cost Segregation Services cost segregation study will be delivered when construction is complete.

Return to top of page

 

 

Why should I choose Cost Segregation Services, Inc.?
Cost Segregation Services, Inc. engineers have the expertise in tax laws, cases, and ruling on cost segregation, along with real estate development and construction experience to maximize your tax savings. Only exceptionally large accounting firms have in-house engineers who can perform a cost segregation study at substantial fees. Cost Segregation Services, Inc. will work with your advisors to help you take advantage of this extremely viable tax savings solution.

Return to top of page