Cost Seg - Advanced Topics

Is a Cost Segregation Study right for you?

Property type: Cost segregation studies are most effective for commercial properties like office buildings, retail spaces, warehouses, and multi-family residential buildings – almost any type of property/building except for your primary residence.
Property age: Newer buildings or those with recent renovations generally yield greater benefits.
Purchase date: The sooner you conduct the study after purchasing the property, the better. You can even do a "look-back" study for older properties, but there are some limitations.

What do I look for in a qualified provider?

Experience matters: Look for a firm with proven expertise in cost segregation, engineering, construction, tax law, and accounting. Ask for referrals or check online reviews.
Clear communication: Choose a provider who can explain the process clearly and answer your questions in a way you understand.
Fee structure: Understand how they charge for their services (flat fee, hourly rate, or percentage of savings).
Audit Support: If you get challenged by the IRS, make sure they can support you and your study findings competently and confidently.

What is the process for a cost segregation study?

Feasibility analysis: The provider will first assess if your property is a good candidate for cost segregation, and explain the reasons to you (or why it does not).
Site inspection: A qualified engineer will likely visit your property to analyze its construction and identify segregable components.
Detailed analysis: The provider will use specialized software and their expertise to allocate costs to different depreciation categories.
Report preparation: They'll provide a comprehensive report documenting their findings, which you'll use for tax purposes.

The Basics

This allows for larger deductions in the early years of ownership, reducing tax liability and freeing up capital.