When you hire someone to perform a cost segregation study, make sure you are getting a quality report. Many firms advertise a detailed Cost Segregation study but are in fact, giving you only a Residual Study. Residual Studies lack proper detail and do not provide necessary information to write-off assets removed from service. On the other hand, Engineering-Based Cost Segregation Studies provide in-depth information for short-term and long-life building components, which allows you to realize tax savings over the entire time you own the property. This can lead to thousands, tens of thousands, or even hundreds of thousands of additional tax benefits for as long as you own the property.
The Benefits of Cost Segregation
A Cost Segregation Study can:
- Shorten the useful lives of assets under accelerated depreciation methods.
- Reduce current federal taxable income by taking the maximum deduction permissible under the tax code.
- Save you BIG Money!
It is essential to assess the quality of cost segregation providers before using their services. If you choose the wrong provider, you could be leaving money lying on the table in the form of tremendous loss of tax savings. The wrong provider can also expose you to risks if you are audited.
The IRS Recommends Engineering-Based Studies
In addition to receiving the greatest tax benefit from a true Engineering-Based Study, you can also take advantage of the ability to write off long-life assets in the years following the study.
If a long-life asset such as a roof or air-conditioning unit needs to be replaced in the next 39 years, you can write off the remaining depreciable balance of that component all in the same year. This simple replacement can amount to hundreds, or thousands of dollars in tax benefits that would otherwise be lost.
Before Deciding on a Provider
Ask to see a sample of their final report. Check the 39- or 27.5-year detail. How many line items do you see? A true Engineering Based Cost Segregation Study will provide hundreds or even thousands of line items detailing the building’s components.
You owe it to yourself (and your wallet) to make sure you are receiving a complete and true Engineering Based Study that will offer them the greatest benefit both at the time of the study and for the life of the property.
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You can also contact us to discuss your project in more detail.
Most Companies Claim To Be Using an Engineering Approach
If they use it at all, it is only an abbreviated version known as a Residual Study.
- They might use Engineering methods to identify and assign costs to the short-life assets, but then they lump the remaining balance into the long-life “Real Property” category, or only provide a dozen or so lines of detail.
- These studies often leave out items that should be reclassified, resulting in lost benefits.
- Residual studies may even overestimate the amount of personal property, leaving you open to increased scrutiny and risk in the event of an IRS audit.
What’s more—these residual providers typically charge between 75-120% of a true Engineering Based Cost Segregation Study even though their short-cut approach takes significantly less work and offers far less in benefits.
We Provide a Different Type of Study
We conduct our studies using true Engineering-Based methodology. A proper Engineering-Based Study or report will have as much detail for the remaining long-life assets as it does for the short-life assets. This means that every asset in your property is assigned both a depreciable life and a project cost.
Our Studies are Audit-Proof
When we perform a study, we reconcile and account for all short-life and long-life assets. You will receive the greatest tax benefit along with the comfort of knowing that the study is fully supported.
Every study we produce has the necessary detail, documentation, and supporting work-papers to stand on their own. However, in the event of an IRS audit and/or if any questions are raised, we will defend our studies at no additional cost. We will even cover any necessary travel costs.
Contact Us today for a no cost, no obligation evaluation.