Do-It-Yourself Cost Segregation
We can reduce the cost of the cost segregation study materially, often by as much as 70%, if the scope of work does not require a site visit. This requires a team approach where you provide property photos / video and cost details along with other key inputs. Our team takes your information and through the use of our proprietary software, organizes it into a cost segregation report uncovering the maximum potential tax savings.
These Detailed Cost Segregation Reports can be used by you and / or your CPA to reduce your Federal income Tax liability. Depending on in service dates and prevailing federal law, this can either be as Bonus Depreciation or as multi-year accelerated depreciation.
DIY Cost Segregation Reports
The Facts About Do-It-Yourself Cost Segregation
DIY cost segregation in its purest form would be you or your tax preparer generating a guesstimate of the short life property found in your asset. It is legal providing you do not materially overstate the amount of depreciation. However, the IRS standard for calculating depreciation is specific.
Cost Segregation requires assigning the “proper recovery period” to each asset. A commercial or residential building may have over 100 short-life components. To do a credible job, you need to know which assets are 5, 7, 15, 27.5 and 39 year and how to value them.
The IRS position on cost segregation is as follows:
In order to calculate depreciation for Federal income tax purposes, taxpayers must use the correct method and proper recovery period for each asset or property owned. Property, whether acquired or constructed, often consists of numerous asset types with different recovery periods. Thus, property is typically separated into individual components or asset groups having the same recovery periods and placed-in-service dates to properly compute depreciation.”
The following is a direct quote from the IRS Audit Techniques Guide for cost segregation. It is clear that the IRS states, “to calculate depreciation for Federal income tax purposes, taxpayers must use the correct method and proper recovery period for each asset…”