What is Cost Segregation?
Cost Segregation is a commonly used strategic tax planning tool that allows companies and individuals who have constructed, purchased, expanded or remodeled any kind of real estate to increase cash flow by accelerating depreciation deductions and deferring federal and state income taxes.
What is a Cost Segregation Study & How Does it Work?
When a property is purchased, not only does it include a building structure, but it also includes all of its interior and exterior components. On average, 20% to 40% of those components fall into tax categories that can be written off much quicker than the building structure. A Cost Segregation study dissects the construction cost or purchase price of the property that would otherwise be depreciated over 27 ½ or 39 years. The primary goal of a Cost Segregation study is to identify all property-related costs that can be depreciated over 5, 7 and 15 years. For example, certain electrical outlets that are dedicated to equipment such as appliances or computers should be depreciated over 5 years.
KBKG goes beyond a traditional Cost Segregation study and will also separate all of the different building structural components (such as the roof, windows or HVAC units) so when they are replaced, a loss deduction can be claimed on them. For leased property, we also separate tenant leasehold improvements.
Case Studies by Building Type
Estimate Your Cost Segregation Savings Instantly
The Cost Segregation Savings Calculator estimates your federal income tax savings and provides:
- Estimated allocation to 5, 7, 15, and real property
- Tax deductions and additional cash flow by year
- Net present value over 10 years and over the life of the property
Try it for free. Enter basic building info and instantly receive the estimated tax savings.
What is Involved in a Cost Segregation Study?
A quality Cost Segregation study evaluates all information, including available records, inspections, and interviews, and presents the findings in a clear, well-documented format. Our process for conducting a detailed Cost Segregation includes a review of any available cost detail for the property, a review of any available blue prints and a physical inspection of the property. If none of this information is available, a Cost Segregation study can still be performed by estimating component values on site.
When should a Cost Segregation study be conducted?
A Cost Segregation study can be completed any time after the purchase, remodel or construction of a property. However, the optimum time for a study for new owners is during the year a building is constructed, purchased or remodeled. For investors who are in the planning phases of construction or remodeling, the best time to consider a Cost Segregation study is before the infrastructure of the building is set. KBKG offers a free preliminary analysis that can help determine the right timing and strategy for any investor.
What should I consider when selecting a Cost Segregation provider?
You should always read the bio and resume of the persons signing your Cost Segregation study. Make sure they are certified with...READ MORE »
Will the company be available if I get audited by the IRS?
Any company can give you a Cost Segregation report with results that save you a lot of money; the real question is whether it will stand up to IRS scrutiny. The true value of the fee you pay is how easy (or painful) the audit process goes. Every Cost Segregation company will say...READ MORE »
Does the company have tax experts that can help if my CPA has questions?
There are so many unique fact patterns and situations that can have a tax impact on how the Cost Segregation deductions will flow through on your tax return. A Cost Segregation engineer does not know enough about tax to truly understand how the Cost Segregation deductions will specifically impact you. Using a firm with tax experts on staff will...READ MORE »
What are the Benefits of Cost Segregation?
Many business owners are surprised to learn of the compelling tax savings a cost segregation study offers. Below is a list of three of the most prominent benefits.
Cost Segregation Tax Insights
KBKG Tax Insight: Qualified Improvements, Bonus Depreciation, and 179 By John Manolos | Senior Manager – Cost Segregation With the passage of the CARES Act on March 27, 2020, Congress addressed the much anticipated “Retail Glitch” associated with the 2017 Tax Cuts and Jobs Act (TCJA). This rule previously prevented investments in qualified improvement property … Read More
Cost Segregation: How It Can Benefit Your Business Tax planning is a vital part of any company’s financial strategy. At its core, it focuses on legal ways of optimizing tax breaks and reducing liabilities. Maybe you’ve heard the term “cost segregation” used by tax professionals. You may wonder, “What is a cost segregation study and … Read More
Cost Segregation for Residential Property A cost segregation real estate analysis is a tax planning method used by companies and individuals who have remodeled, constructed, or purchased any type of real estate. This method allows them to accelerate depreciation deductions, which in turn defers federal and state income taxes and increases cash flow. If you … Read More
Can You Do Cost Segregation for Commercial Real Estate? Claiming tax benefits can help you avoid losing money on your commercial real estate investments, especially if you intend to operate your properties for years to come. A common tax benefit is to claim your buildings on your tax form as depreciations. Using cost segregation for … Read More
Cost Segregation and Allocation for Mixed-Used Properties: What You Need To Know Seasoned tax professionals and CPAs understand the importance of cost segregation real estate studies. Mixed-use buildings present notable tax complexities, especially with applicable IRS regulations. A Certified Cost Segregation Professional (CCSP) can help with navigating these complexities. A condo tax basis allocation and … Read More
How Does Cost Segregation Work for Residential Real Estate? Cost segregation in real estate is a way for real estate investors to deduct from their taxes the amount of depreciation or the decline over time of the value of their property. Real estate cost segregation presents an opportunity for property owners to pay fewer taxes … Read More
Choosing the Best Cost Segregation Provider If you own an investment property, you know that depreciation of the structure can take 10-40 years or more, which means it can be quite a long time before you see the tax benefits from it. What you might not know is that you can receive deductions for non-structural … Read More
The Power of Cost Segregation Analysis: Maximizing Tax Benefits for Residential Real Estate Owners Tax professionals and CPAs strive to provide the best possible services and advice to their clients. This often requires a delicate balance between acting in a client’s best interest while complying with applicable laws. When seeking to extend tax benefits for … Read More
Tax Professionals for Cost Segregation A cost segregation real estate analysis is a type of strategic tax tool allowing individual property owners and companies who have constructed, modified, or remodeled any property to accelerate cash flow by increasing depreciation deductions. This depreciation can help property owners defer state and federal income taxes to some degree. … Read More
Best Cost Segregation Studies for Real Estate Cost segregation is a tax planning tool that allows property owners who have purchased, constructed, or expanded any type of building to improve their cash flow and reduce their tax burden by deferring state and federal income taxes. When you purchase or construct a building, you are also … Read More