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 Alert: House passes proposed bill to Fix 174 Capitalization, Extend 100% bonus depreciation, and Cut Off New ERC Claims, now in Senate consideration. Proposal Aims to Boost Businesses with Immediate Deductions for Domestic Research and Experimental (R&E) Expenditures and Capital Investments on qualified property while reining in the Employee Retention Credit (ERC). The … Read More
Cost Segregation for Airbnb, Vrbo, HomeAway If you’re an Airbnb, Vrbo, or HomeAway host, you’re likely familiar with the complexities of managing and optimizing rental properties. What you may not be aware of, however, is a powerful financial tool that can help you maximize your property’s financial benefits while minimizing your tax liability – Residential … Read More
Unlocking Hidden Value: The Power of Cost Segregation Studies Optimizing tax benefits and enhancing cash flow are pivotal to achieving financial success in finance and real estate. One strategy with significant potential is cost segregation. Dive into cost segregation basics, explore what a cost segregation study entails, understand its timing and relevance, and discover KBKG’s … Read More
KBKG’s Residential Cost Segregator Cost segregation is a powerful tool for maximizing tax benefits on real estate investments. This IRS-approved strategy can speed up depreciation, but harnessing the solution’s full potential requires professional expertise. That’s where KBKG’s Residential Cost Segregator® comes in. Our revolutionary program spotlights tax advantages typical owners miss. Explore residential cost segregation, … Read More
Accelerate Deductions for Better Cash Flow With KBKG Tax professionals often face residential cost segregation challenges when dividing expenses for multi-unit properties. If this struggle sounds familiar, you might be missing the necessary tools and resources for a successful real estate cost segregation allocation. KBKG streamlines and simplifies the process with our Residential Cost Segregator® … Read More
KBKG’s Approach to Residential Cost Segregation Here at KBKG, we conduct in-depth cost segregation studies for a number of clients. Our studies can help you reduce your tax burden and save money. We realize that performing a residential cost segregation study can be intimidating, so we work closely with you every step of the way. … Read More
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 … Read More
Can You Do Cost Segregation on Residential Rental Property? If you’re a real estate investor or property owner, you’ve probably heard about cost segregation and how it can help you maximize tax benefits. But can you do cost segregation on residential rental property? The answer is “yes.” Below, we explore how cost segregation works for … Read More
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