Service 03
Cost Segregation Study
Cost segregation is an engineering-based analysis that separates a building into its components so the parts qualifying for a shorter depreciation life are recorded on that shorter life instead of the building's full 27.5 or 39 year schedule. Whether it makes sense for a given property depends on the property type, purchase price, placed-in-service date and your tax position.
An engineering-based study that puts each part of a building on the depreciation life that actually applies to it, documented well enough to be defended.
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The Problem
A building is not one asset.
By default your property depreciates on a single long timeline: 27.5 years for residential, 39 for commercial. But carpet, cabinetry, dedicated electrical, site paving and landscaping often qualify for 5, 7 or 15 year lives. Without a study, all of it sits on the long schedule by default. A cost segregation analysis separates the components and documents why each one belongs where it is placed.
Inclusions
What is included.
- 01An engineering-based cost segregation study of each qualifying property
- 02A component breakdown supported by construction records, invoices and site inspection
- 03A written engineering report you can hand to a reviewer
- 04Coordination with bonus depreciation, so the timing of the two is planned together rather than separately
- 05Real estate professional status review, because whether accelerated depreciation can offset active income depends on how you qualify
- 06A look-back study on property already placed in service, where the facts support it
- 07Recapture modelled before you buy, so a future sale is not a surprise
- 08Documentation retained to the standard our audit protection engagements use
The Architecture
Timing, engineered and documented.
Cost segregation is a timing tool. It changes when a deduction is taken, not whether the asset was yours. That distinction is the whole discipline, and it is why the study has to be built to survive review.
- 01
Timing, not magic
A study moves deductions earlier in the life of the asset. It does not invent them, and we will not describe it as though it does.
- 02
Built to defend
The engineering report is the substantiation. It is written to be read by a reviewer, not filed and forgotten.
- 03
Planned with the structure
Cost segregation interacts with passive loss rules, 1031 exchanges and entity choice. Running it in isolation is how the benefit gets stranded.
- 04
Recapture named up front
Accelerating depreciation can increase recapture on a later sale. We model that before the study, not after you have sold.
- 05
Applied to what you already own
A look-back study can often reach property placed in service in an earlier year, where the facts support it.
- 06
Told candidly if it does not fit
Not every property is a candidate. If a study is not worth running on your portfolio, that is what you will hear.
Proof
“They explained everything in plain English, showed me the numbers, and delivered.”
Frequently asked questions
What is a cost segregation study?
A cost segregation study is an engineering-based review that breaks a building into its components and assigns each one the depreciation life that applies to it. Whether the result is meaningful for you depends on the property, when it was placed in service and your own tax position.
Is my property a candidate for cost segregation?
Not every property is. It generally depends on property type, purchase price, how long you intend to hold it and whether you can use the resulting deductions. We tell you candidly if a study is not worth running on your portfolio.
What is depreciation recapture, and does cost segregation affect it?
Accelerating depreciation can increase depreciation recapture on a later sale. That is why recapture is modelled up front, and why a study is planned alongside any 1031 exchange rather than after it.
Can a study be run on a property I already own?
A study can often be applied to property already placed in service in an earlier year, without amending prior returns. Whether that applies to you depends on your facts and the year the property went into service.
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