Cost Segregation Consulting

Cost Segregation Consulting

Cost segregation is the reclassification of fixed assets into shorter tax lives in order to maximize, or front-load, the depreciation of an asset. A cost segregation analysis will separate an asset, or building, into its different components according to the IRS tax code. The different asset components that can be taken advantage of are outlined in the IRS official tax code that is updated each year. In order to be the most beneficial cost segregation service, our cost segregation consultants must be up to date with the ever-changing tax legislation. Cost segregation services can be utilized whenever a building is purchased, constructed, or undergoes a substantial renovation or expansion. It is important to note that cost segregation services are not limited to only cost segregation studies. A cost segregation consultant will perform a detailed site inspection of each property in order to properly classify each of the building’s distinct assets. The site visit portion of the cost segregation analysis requires detailed note taking and picture documentation of the building’s different assets. Cost segregation consulting often includes the analysis of blueprints and an in-depth review of construction costs. It is important to look for an engineering approach when searching for cost segregation services near me. After the site visit, the consultant will perform calculations in order to produce a cost segregation study and cost segregation report. A cost segregation report example details the tax support and photo documentation of the assets in review. A comparison to a cost segregation report example is a property appraisal. There are opportunities for cost segregation services in almost every industry, both residential and commercial. Cost segregation services can range from a full cost segregation study to a simple “scrub” of the depreciation schedule. Cost segregation consulting requires a consultant to put the client in the best situation possible. Sometimes, a cost segregation study is not necessary. A cost segregation example could be an apartment complex, distribution facility, or office building. A cost segregation analysis could help any kind of property. Cost segregation consulting can also identify additional services not directly related to cost segregation services.

Cost Segregation Study Do It Yourself

When considering the question, “is cost segregation worth it?” many will also consider a cost segregation do it yourself method. There are even books that will claim they can provide cost segregation for dummies. How much does a cost segregation study cost may also be a deciding factor for some companies. The answer to is a cost segregation worth it may depend on the method you choose. The IRS does not advocate for a cost segregation study do it yourself method. The IRS cost segregation checklist advises a professional trained in an engineering-based approach performs a cost segregation analysis. Someone who has read cost segregation for dummies does not meet these standards. A simple search for cost segregation study near me will almost always provide a more technically sound cost segregation study provider than the cost segregation do it yourself method. A cost segregation for dummies approach may provide increased tax savings, however it also may increase the potential for audit by the IRS. Engineering-based cost segregation study providers are the most technically sound providers of cost segregation studies according to the IRS cost segregation checklist. The cost of engineering-based cost segregation studies will always be higher than the do-it-yourself method. The difference in quality is not comparable. The tax dangers of a cost segregation for dummies approach are much greater than the increased price cost of an engineering-based approach. A cost segregation checklist should include the following items: site visit, cost review, blueprint review, and the use of construction cost estimators. While a cost segregation study do it yourself approach may include a site visit done by yourself, a site visit performed by a trained, engineering-based approach is preferred by the IRS audit technique guide. If you are asking, can I do my own cost segregation study, the answer is almost always no.

Cost Segregation Calculator

A cost segregation for dummies book may detail the varying asset components that can be found within a given property. However, it will not provide a cost segregation calculator or cost segregation software to help you realize potential tax savings. The IRS cost segregation guide instructs a taxpayer to utilize construction cost estimators in their cost segregation calculator. Often times, this will look like a cost segregation excel template or a cost segregation spreadsheet. The first steps to calculating the benefits of a cost segregation study are to create a detailed inventory of the different components found within a given asset. A cost segregation study will also utilize construction blueprints in order to confirm the inventory of assets. The inventory of assets is then combined with construction cost estimators to produce a reconstructed cost for the asset. Once a value for a given asset is determined, we can then classify the asset into its correct asset class. Asset classes are determined and defined by the IRS tax code, which gives the basis for the IRS cost segregation guide. A cost segregation excel template enables a provider to more efficiently and effectively assign correct asset classes to various components of the building. The IRS tax code assigns tax lives to the asset classes, which allows a taxpayer to accelerate the depreciation of an asset. Different variations of cost segregation software can be used to determine asset classifications; however, they do not provide the same amount of detail a cost segregation excel template, or spreadsheet, can provide. The IRS provides a guideline for cost segregation calculators but there are no exact methods. Due to this, cost segregation spreadsheets may vary from provider to provider. A cost segregation for dummies approach may not be directly based on the IRS cost segregation guide.

Cost Segregation Bonus Depreciation

In 2001 to stimulate the economy congress first instituted bonus depreciation. Bonus depreciation was a way to write off assets in the first year. By using cost segregation bonus depreciation can increase by recognizing what assets are eligible. While some people look for a cost segregation template, very few cost segregation excel templates exist. Most of these are developed by cost segregation companies to follow the irs cost segregation guide. Determining what is eligible for bonus depreciation is not easier either. Prior to the 2017 Tax Cuts and Jobs Act bonus depreciation was only available for new construction. However, after the 2017 law bonus depreciation can be taken on existing assets. This can even be done on a retroactive basis by filing a form 3115. Most cost segregation firms can provide a form 3115 cost segregation study example showing how these two things can work in tandem. It is important to note that the bonus depreciation can increase the value of a cost segregation study. This is why it is more important than ever to have the cost segregation study completed accurately. Without a set cost segregation depreciation guide it is important to hire competent professionals and not someone that learned how to do a study by reading a book cost segregation for dummies.

Cost Segregation Real Estate Example

A cost segregation study can be completed on new construction or on purchased properties. This can cause taxpayers to look for cost segregation examples including cost segregation on residential real estate, cost segregation on rental property, or even cost segregation on vacation rentals. First let’s examine the last one, cost segregation on vacation rental, vacation rentals are often single-family homes or condominiums, so what are some of the things we need to consider with cost segregation on single family homes? The first thing that needs to be considered is whether the property is considered residential rental or non-residential, as this affects the life of the asset. When considering a cost segregation on residential real estate it is important to know what to watch out for. Cost segregation on residential rental property is allowed by the IRS if it is not the taxpayers primary residence. However, it is important to consider other issues including if the taxpayer is a real estate professional. Cost segregation for real estate professionals can be much more valuable as the real estate professional does not need to worry about passive lost issues. Rental property cost segregation can be another valuable tool to look at, one cost segregation real estate example may be a study on a rental office building, or on a rental restaurant. As noted the rules can get complicated, this means that learning how to do cost segregation through a book like cost segregation for dummies, may be problematic. This is also why when someone looks for a cost segregation study performed by a firm near me, they find a lot of national companies. These companies have the ability to hire and train professionals in this complicated area of tax law. Having access to these professionals is critical to ensuring that a cost segregation study is done in a quality fashion. A cost segregation study done on a renal property by a trained professional should lead to a better result, and a more defendable result with the IRS. Hiring the right cost segregation professional allows taxpayers to be comfortable in the final analysis.