What is a Cost Segregation Study?

A study is required in order to correctly identify components of a building that can have a shorter life and qualify for bonus depreciation. Here is what you can expect from start to finish.

1. Initial Assessment & Feasibility Review: We begin with a consultation to determine whether a cost segregation study makes financial sense for your property. We consider, purchase price or construction cost, property type and use, date property was placed in service and estimate earnings and tax benefit. We'll typically ask for closing statement or construction costs, depreciation schedules, building plans, blueprints, or contractor breakdowns and site inspections (if applicable).
2. Site and Property Review: An engineering-based study often involves inspection to identify and document physical components of the property. We analyze building layout and design, interior and exterior finishes, electrical, plumbing, HVAC systems, specialty-use components (e.g. medical equipment wiring, dental cabinetry, car lifts, etc.), and land improvements.
3. Engineering & Cost Estimation Analysis: Using construction blueprints, cost records and IRS guidelines, we will reclassify building assets into proper lives (5, 7, 15 or 39/27.5 years). Next we'll allocate construction or purchase cost to each category and ensure classification aligns with IRS-approved methodologies. 
4. Final Report Delivery: You will receive a comprehensive, audit-ready report that includes detailed breakdown of asset classifications and IRS-compliant methodology and documentation.

Mistakenly a cost segregation study is often unexplored as businesses believe there is no advantage or the costs outweigh the benefits. However, it is fantastic tax planning tool that when used appropriately can maximize tax savings and help with business planning.