ALL ABOUT COST SEGREGATION:
Three Types of Cost Segregation Studies
1. The “Engineering” Method is the study our Cost Segregation team uses. It is the most comprehensive study and therefore is the IRS’ preferred methodology when performing a Cost Segregation Study. Because it is so detailed, this study provides the client with the largest tax savings.
We maximize the client’s benefits by researching every potential opportunity by utilizing this extremely detailed as outlined in the IRS Cost Segregation written guidelines of 2004, revised in 2008. As a result, the client receives 100% of the benefits to which the property owner is entitled.
2. The “Residual” Method is “engineered based” and is the second most popular Cost Segregation Study. Because this method is “engineering based,” we frequently come across companies mistakenly using the method and referring to it as an Engineering Study, when it is not. The final report lacks the detail of a true Engineering Report as described above.
This method will depreciate approximately 65-75% of a full “Engineering” proposal. The “Residual’ method is primarily used by clients who don’t have the income to offset the deductions t” method produces and costs less than a full “Engineering” study.
3. A typical CPA approach to cost segregation is only able to account for 20-30% of allowable deductions if they are not using a specialized tax engineering firm. This is because they are limited to a small amount of verifiable information. There is no question that the Cost Segregation rules rely heavily on a physical inspection of internal electrical, wiring, plumbing, improvements as well as external grounds, parking facilities, landscaping and much more.
Companies have different levels of Cost Segregation Savings