Your real estate assets may have hidden value. Your building is a key asset, and with any major investment, you want to get the best return. But do you know how you can:
- Maximize your return?
- Reduce your taxes and increase your cash flow?
- Accelerate the depreciation deductions of your building's assets?
A cost segregation study can accomplish all three of these goals. The study examines the assets of your building and identifies those that can be depreciated over different and faster recovery periods than if they remained classified as residential real property (27.5 years) or nonresidential real property (39 years). For example, some assets can be categorized as land improvements (15 years) or items whose sole purpose is not for the operation and maintenance of the building but for equipment use (5-7 years).
When done correctly, cost segregation studies accelerate your depreciation deductions, resulting in a lower tax bill and an increase in current cash flow.
Our Cost Segregation Study Process
When we perform a cost segregation study, you can expect:
- A site visit to determine if the building plans are accurate, identify those items that can be moved into the 5-year and 15-year “buckets,” and document the property through pictures and narrative video in case the study is ever looked at by a third party.
- Construction specialists who use the building plans to determine measurements, electrical power loads and other counts of the building components and classify them according to the recovery periods referenced above.
- Pricing of the building components using “an accepted third-party pricing source” that is consistently applied to all of the building components.
- A thorough report that explains the process and, more importantly, the tax justification for those items moved to a 5-year or 15-year recovery period.
A quality study will use specialty engineering software that can download the building plans, perform all of the engineering calculations and determine the appropriate pricing for the calculations by linking with a third-party pricing service. This methodology results in greater accuracy, and, more importantly, a document that supports engineering and pricing processes in one location.
The Eide Bailly Cost Segregation Team
The IRS requires that cost segregation studies be performed by firms that demonstrate engineering, construction, tax law and accounting expertise. Eide Bailly’s cost segregation professionals are nationally recognized industry specialists that meet these requirements. We will complete a thorough site visit, review the building plans and analyze cost details for the building to determine which assets can be reclassified to shorter depreciable recovery periods. We'll work closely with you throughout the process to ensure you are getting the greatest benefit. Our cost segregation studies include complete estimates, technical report, audit support (if needed), invoice review, computed benefit and/or general guidance.