providing tax benefits to clients without hiring a specialist. The software is available for residential rental properties up to
6 units with a depreciable tax basis of $500,000 or less (purchase price less land).
designed to address residential rental property with a maximum of
$500,000 in depreciable basis.
Preview Your Tax Savings with KBKG's Residential Cost Segregator® Calculator
Try before you buy. Use our free preview calculator below to instantly estimate the benefits of the Residential Cost Segregator®.
*The cost of a report does not include your tax preparer’s fees to assist with information gathering, reviewing data, and implementation on your tax return. Please consult your tax advisor regarding additional fees.
Frequently Asked Questions
What’s the difference between a formal Cost Segregation study performed by experienced engineers and a Residential Cost Segregator® report?
For most buildings, a Cost Segregation study requires the knowledge of a Certified Cost Segregation Professional (CCSP) with an engineering background. This is because of variations in construction from one building to another as well as varied tax law depending on building types. The engineer physically inspects the property and performs construction quantity takeoffs to account for each building component. Empirical cost data is then used to reconstruct the cost of the entire property. The result is a report with schedules showing values that can be substantiated by the data collected by the engineer.
The Residential Cost Segregator® utilizes many of the same concepts, calculations, and data. Instead of an engineer, the Residential Cost Segregator® relies on data provided by the building owner. So if the building owner indicates the property has carpet in the bedrooms and was acquired with certain appliances, the software accounts for these items. The information provided is processed using KBKG’s proprietary algorithms and empirical data to generate a logical breakdown of costs for each major property component.
The Residential Cost Segregator® is designed specifically for properties too small to hire an experienced CCSP to analyze. Because every property is unique, it may not account for unusual items that exist and generally provides a more conservative allocation than may be available to the taxpayer. The Residential Cost Segregator® is not adequate for use to conduct a Cost Segregation study on larger, more complex properties.
What is Cost Segregation and why should I do it for my rental property?
Cost Segregation is a commonly used strategic tax planning tool that allows building owners who have constructed, purchased, expanded or remodeled real estate to increase cash flow by accelerating depreciation deductions and deferring federal and state income taxes.
A Cost Segregation report for residential investment property dissects the purchase price of the property that would otherwise be depreciated over 27.5 years for income tax purposes.
• Accelerate Depreciation Deductions:
The primary goal of Cost Segregation is to identify all property-related costs that can be depreciated faster (typically over 5, 7 and 15 years).
• Retirement and Partial Disposition Deductions:
The secondary goal of Cost Segregation is to establish the depreciable tax value for each major building component that is likely to be replaced in the future. Examples include roof, windows, doors, bathroom fixtures, HVAC, etc. When a component is replaced, taxpayers need this information to claim a “retirement loss” or “partial disposition” deduction for its remaining depreciation.
• 2 Story Residential Duplex
• Depreciable basis = $300,000
• Placed in Service two years ago
• Building Area: 2,000 SF
• Lot Size: 4,000 SF
Immediate benefits from reclassification to shorter tax lives:
• Additional deductions of $21,000 in the first year
• Additional deductions of $28,000 in the first 5 years
• Net present value of $7,500*
*Using a tax rate of 40% and 8% ROI. Does not include benefits from a future partial disposition of building components.
Free Webinar for CPAs
Cost Segregation Software Tools & Tax Strategies
Participate in a live demo for cost segregation software tools including the Residential Cost Segregator™ and the KBKG Partial Disposition Calculator.
Learn how to generate cost segregation reports in 3 easy steps for residential rental properties with a purchase price of $500k or less (excluding land).
Cost Segregation Tax Insights
Acquiring or constructing a gas station with a convenience store (“C-store”) can be a lucrative addition to a real estate portfolio. Current rules allow investors to immediately write off all the improvements if certain requirements are met, and the property is placed in service after September 27, 2017. This went into effect after the Tax … Read More
KBKG Tax Insight: Form 3115 May be Used for Changing to ADS Depreciation for Residential Rental Property
The IRS on June 17, 2021 issued Revenue Procedure 2021-28, which provides procedures for taxpayers to change to the alternative depreciation system (“ADS”) for certain residential rental property placed in service prior to January 1, 2018, held by an electing Real Property Trade or Business (RPTOB). KBKG Insight: A RPTOB that made the election under … Read More
Governor Kim Reynolds recently signed into law Senate File 619 relating to a multitude of state and local tax issues. Included within this law is the retroactive applicability of Federal Bonus Depreciation rules for qualified assets placed into service on or after January 1, 2021. Additionally, the State of Iowa will remain decoupled from the … Read More
Learn about Bonus Depreciation with Lester Cook, CCSP at MCIPA’s Tax Professionals and the IRS: Successfully Working Together Conference
KBKG Principal Lester Cook, CCSP will be virtually presenting Bonus Depreciation Update at MICPA’s Tax Professionals and the IRS: Successfully Working Together Conference. Taking place on June 9th from 3:10 PM – 4 PM Eastern time, this presentation will provide information on bonus depreciation and other related depreciation issues. Lester will clarify when bonus depreciation … Read More
Overview Treasury and the IRS are contemplating additional procedural guidance that will assist taxpayers with compliance related to the ADS recovery period change for residential rental property. This is required under the Tax Cuts and Jobs Act (TCJA) when Real Property Trades or Businesses (RPTOBs) make the election under 163(j) to avoid interest expect limitations. … Read More
As featured in AICPA Tax Adviser – April 15, 2021 Heating, ventilation, and air conditioning (“HVAC”) replacement costs can be significant expenses for businesses that own or lease real estate. This guide is intended to help tax practitioners distinguish between deductible repairs and more extensive work that must be capitalized. Each year, tax professionals who … Read More
The Qualified Improvements Quick Reference Chart is KBKG’s most sought-after resource by CPAs across the nation. We have updated the chart to reflect recent changes. Qualified Improvement Property (QIP) is defined as any improvement made by the taxpayer to an interior portion of a building that is nonresidential real property as long as the improvement … Read More
As featured in Accounting Today Calculating land and building values for tax purposes is a critical step toward maximizing your available tax deductions from depreciation. This is because the law says you can only depreciate items that wear down over time (i.e., the building and not the land). Since most real estate purchase agreements do … Read More
Atlanta, Georgia – Nationwide tax specialty firm KBKG hired two new Directors, Amar Patel and Ian Williams, as part of their Southeast practice. Both Directors join KBKG with over 25 years of combined experience in Cost Segregation and Research & Development Tax Credits, two key services offered by the firm to CPAs and businesses. As … Read More
As featured in AICPA Tax Adviser – February 4, 2021 In November 2020, the IRS issued final regulations defining real property for Sec. 1031 like-kind exchanges (T.D. 9935). The new regulations were needed because the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, amended Sec. 1031 so personal property is no longer eligible for a … Read More
Are you or your clients interested in performing a cost segregation study before the upcoming March 15 tax deadline? KBKG is committed to timely work. Since the months leading up to a tax deadline is our busiest time of year, we encourage you to start the process now to avoid any delays in filing your … Read More
On November 6, 2020, the IRS released Revenue Procedure 2020-50 providing guidance on implementing the most recent bonus depreciation regulations. These regulations, issued in September 2020, addressed feedback and slightly revised provisions of the 2019 proposed bonus regulations. Since the Tax Cuts and Jobs Act bonus depreciation rules have changed over the iterations of proposed … Read More
“I used the Residential Cost Segregator® software right after it came out in September of 2016 for a client that had multiple single family rental properties. The cost seg report savings on the properties were tremendous. The client was very happy and I was able to charge a lot more for the tax return.”
-- Jeff Robertson CPA, Klein, Bogakos and Robertson, CPAs Inc