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**Property value is the depreciable basis. Depreciable basis in the purchase price plus the cost of improvements minus allocated land value.
***Renovation cost includes the total of all direct and indirect capital expenses submitted for review.
****Study Delivery Timeline begins when all requested information and documentation has been received.
*****Approved methods include: payment applications, invoices, construction cost ledger. Approved methods do not include: bank statements, miscellaneous receipts, handwritten letters or emails. Unapproved methods will be asked to categorize the construction cost in a provided excel file template.
Frequently Asked Questions
The best time to perform a cost segregation study is within the tax year that the building is purchased or construction is completed. If you are planning on renovating your property we recommend performing a cost seg prior to those renovations.
You can have a look-back study done on assets acquired as far back as 1987 and claim the resulting write-offs using the 3115 Automatic Change without amending prior-year tax returns.
There are diminishing returns to performing a study the longer you own and depreciate a property. Contact us to determine if your property is a fit for a cost segregation study.
We pride ourselves on offering affordable cost segregation studies for every budget and property type. Our self-directed Rapid Report (available for smaller residential properties, up to 4 units) is available for $895. Fees for our Fully Engineered Study vary based on square footage, property type and complexity. Compare our cost segregation study services or request a free proposal for your property here.
If you are planning to sell the property in a taxable transaction a cost segregation study may not make sense because of recapture.
We generally recommend you hold a property for at least 3-5 years. However, if you are planning to enter into a like-kind exchange (non-taxable transfer of your property for another property) you will not have depreciation recapture issues until you sell the replacement property.
Any type of income-producing property placed into service after 1986 qualifies for cost segregation. We frequently work on residential such as short-term rentals as well as commercial projects.
It's essential to differentiate between active income, earned through employment or business activities, and passive income, derived from investments or rental properties. Unless you are a Real Estate professional, you may not apply losses from a Cost Segregation to offset your W2 Income.
However, in the case of short-term rentals, income generated from renting out a property is generally considered passive. Yet, if the taxpayer actively manages and maintains the rental property, there may be an opportunity to offset this passive income against their active income. Consulting with your tax professional is advisable to determine your eligibility for such adjustments.
Yes, The cost segregation study serves as a valuable tool for your CPA to optimize property depreciation. It is a one-time process with no specific timeframe for completion. If you intend to leverage the study for a particular tax filing, it remains valid for that tax year as long as the property was placed in service within that same tax year or prior. The report holds its validity as long as it is submitted before you file your taxes, irrespective of the year in which the study was conducted.