Residential Cost Segregation - The Basics

A real estate cost segregation study is a tax planning process used by property owners who have constructed, purchased, or remodeled any type of income-generating property. The study allows them to accelerate depreciation deductions, which can defer state and federal income taxes and increase cash flow.

If you are the owner of residential real estate of any type, a study may be financially beneficial to you in many ways. That is why KBKG is committed to thoroughly and accurately conducting residential cost segregation studies on behalf of our clients.

Benefits of Conducting a Cost Segregation for Residential Real Estate

There are many benefits of residential cost segregation. Although the cost segregation real estate process may seem complicated, many of these benefits are practical and worth pursuing. If you currently own residential real estate, conducting a cost segregation study on residential rental property can:

  • Improve Cash Flow – By taking advantage of accelerated depreciation, you can claim additional deductions in the early years of your property, boosting your cash flow. This can be especially useful during the first years of purchasing, remodeling, or constructing a property when budgets are tight and having money on hand can be beneficial.
  • Reduce Tax Liability – When you categorize various components of a home’s exterior and interior, you can accelerate depreciation on these components. In other words, you will pay less in taxes by reducing your taxable income.
  • Improve Efficiency – By classifying and identifying the various components of your property, a cost segregation study can help you maintain and manage the property more effectively in the long run. This improved efficiency can result in lower operating costs.

Time Frame for a Cost Segregation Study

The length of time it takes to complete a full-cost segregation study depends on a variety of factors, such as how complex your property is. In most cases, a study can take anywhere from a few weeks to several months. Here are some of the most critical factors that impact how long a cost segregation study will take:

  • Availability of information – If detailed information about your home’s components is already available, it will take less time to perform the study. The more time a tax professional must spend obtaining information about your home, the longer the study will take.
  • Quality of documents – If your documents lack vital information or are incomplete, the cost segregation analysis real estate study will take longer.
  • Property size – Completing residential cost segregation study times are longer for larger, more complex residential properties.

Online Educational Resources

KBKG specializes in performing cost segregation real estate studies and aims to educate tax professionals about the strategic value of performing these studies. We offer webinars to anyone interested in learning more about using new software and other tools needed to conduct a thorough cost segregation study. You can also take advantage of our residential cost segregator calculator to estimate your potential savings.

Learn More About Cost Segregation Studies From KBKG

Here at KBKG, we understand the key elements of a cost segregation study, and we want you to make the most of your property and potential deductions. We aim to help individuals and companies reduce their tax burden and boost cash flow over time. Get in touch with us today to learn more about cost segregation study real estate.