Frequently Asked Questions
How long does it take to complete a cost segregation study?
From the time we receive all of the appropriate documentation, a cost segregation study normally takes about 60 days.
What material is needed to complete a cost segregation study?
Ideally, we would like a full set of construction plans, final AIA application and certification for payment document or other cost information, current tax depreciation records, building cost budget information, change orders, direct or indirect costs paid by the owner not included in other documents, and other information depending upon the project.
What if I don't have the necessary materials? Can a cost segregation study still be performed?
Yes, our engineering specialists can do an extensive site visit. They will measure and estimate costs using accepted techniques and pricing guides to identify all property costs and to determine which components qualify for shorter recovery life periods.
Can I use my own engineers and accountants?
From our experience, it is most beneficial and cost efficient for us to use specialists who are familiar with and specialize in cost segregation work. They understand the components that qualify and know how to document and substantiate their work. Consequently, their work also better withstands IRS scrutiny, and they are able to assist with any IRS challenges.
How much is a feasibility study?
A feasibility study (an estimated benefit calculation) is free.
Explain the concept of Net Present Value (NPV).
Net present value is the calculation of the present value of tax savings achieved over a 39-year or 27.5 year depreciation period (life of the asset). It is a time-value of money based on the assumption that one can use the accelerated cash flows to create additional income.
Can my current CPA do a cost segregation study for me? Can you work with my current CPA to get a cost segregation study done?
Not all CPAs are experienced in cost segregation work. If your CPA is not experienced in this area, we will gladly work with them on a consulting basis to complete the work for you. We currently have relationships established with firms nationwide who call us in to do this type of work for their clients.
Do my chances of being audited increase once a cost segregation study is completed on my property?
It is difficult to know what might trigger an audit. In our experience, the chance of being audited does not substantially increase after a cost segregation study, and audits on our studies have been rare.
Will professionals at The Cost Segregation Group be available to assist in the event of an audit?
Yes, The Cost Segregation Group will be available to assist in the event of an audit. In the preparation of a cost segregation study, our focus is to create documentation and support for our conclusions so that they are easily communicated and resolved with the IRS.
What does a cost segregation study cost?
We charge a fixed fee for cost segregation studies, so you know the total cost of the study upfront. The fee can be impacted by how large or small the real estate project is. In addition, the location, accessibility, and quality of the records and documents impact the ultimate cost.
When items are classified as personal property in a cost segregation study, does that increase my personal property tax?
In general, a cost segregation study will not impact personal property classifications. The work done in a cost segregation study is for tax depreciation purposes only. The classification for depreciation purposes does not change how the property is classified under the personal property tax laws of the jurisdiction where the property is located. However, we would recommend a review of the applicable local personal property statute.
Who do I call for more information?
For more information on cost segregation studies, contact Cathy Harris at The Cost Segregation Group at 757-533-4118 or email charris@costsegregationgroup.com.