Frequently Asked Questions (FAQ)
Cost Segregation Analysis
Will I be charged for a preliminary cost segregation analysis?
No. There is no cost for a preliminary cost segregation analysis.
Will my property be physically inspected as part of the process?
Yes. We have professionals that inspect income producing properties throughout California.
Will my CPA or Enrolled Agent be familiar with the benefits of a cost segregation analysis?
Most will be familiar with the benefits of accelerated depreciation and the long term deferral of state and federal taxes. Feel free to have your CPA or Enrolled agent contact us if he or she has any questions.
Is it absolutely necessary for my income properly to be inspected to complete a cost segregation study?
Yes. Without a through and competent inspection, it is not possible to produce a quality cost segregation report. A report produced without an inspection invites an audit by the IRS and FTB. When the government audits a taxpayer because they are challenging a cost segregation report, the taxpayer is facing substantial CPA fees, additional taxes, and severe penalties. It also invites the IRS and FTB to audit the remainder of the taxpayer's returns.
How long does it take to complete a cost segregation analysis report?
It takes approximately six weeks from the time the required information is received.
How much does it cost to obtain a cost segregation analysis report?
The initial analysis is free. Its purpose is to determine if it makes economic sense to pay for a full analysis and written report to be provided to your tax return preparer. After the free initial analysis indicates it makes sense to go forward, the cost will be approximately $2,000 for a small rental property to $15,000 or more for very large apartment communities or commercial properties.
How is the fee for a cost segregation analysis payable?
The deposit is 50%. The balance is payable when the report has been completed.
Is the fee that I pay for a cost segregation analysis and written report a tax-deductible expense?
Does a cost segregation analysis include an allocation between the land value and the improvements values?
Can I obtain a cost segregation analysis for a building that is under construction?
For projects under construction, we can provide a preliminary estimate. The final study will be delivered when the construction is completed.
Is cost segregation and accelerated depreciation an approved method of depreciation?
Absolutely. Both the Journal of Accountancy and the American Institute of Certified Public Accountants (AICPA) recognize cost segregation and accelerated depreciation as an approved method of depreciation.
What does the term engineering-based mean?
It means that one or more engineers will be involved in developing the final report submitted to you.
Can I perform my own Cost Segregation Analysis?
Unless you have a staff of accounting, tax, construction, and engineering experts available, you should hire a professional firm.
We own a single rental home. Is it cost effective to obtain a cost segregation analysis?
The answer is probably yes. A preliminary analysis costs nothing, so you are encouraged to obtain one.
We own a house that we make exclusively available for Airbnb rentals. Can we take advantage of cost segregation in order to reduce our state and federal income taxes?
How often must I obtain a cost segregation report for each property?
Usually only once, The only exception would be if you completed a major renovation to the property or added square footage. It would then be your option to consider obtaining another free preliminary analysis.
What are some of the separate building components that can be depreciated in less than the 27.5 years for residential income properties or 39 years for commercial properties?
Since every building is unique, the list of separate building components will vary from building-to-building. Following is a partial list of typical components that may apply to your building:
Air conditioning Systems
Bathtubs and Sinks
Carpeting and Pads
Doors and Frames
Emergency Exit Signs
Gutters and Downspout
Sidewalks and Curbs