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Does DIY or Full Cost Segregation Make Sense for Me?

The answer of course depends on you and your circumstances. Let’s consider two examples:
James owns a construction company and earns $1 MM steadily. He recently purchased a $4 MM office / laydown yard, with extensive site improvements. In this case let’s review two options: 1) full service 40% year one short-life depreciation versus 2) 36% without a site inspection. Assume 30% marginal tax rate. Year one depreciation in case 1 is $1.6 MM versus $1.44 MM without the site inspection. At a 30% tax rate, the savings are: 1) $480K with full service versus 2) $432K with limited service. In this case, given the high level of annual income, the small marginal cost of full service makes sense.

Bob owns a start-up that has average taxable income of $50,000 per year. The business is expected to have great potential and stabilized profits are understated since the business is spending $3 MM annually to grow the client base. The business purchased a $5 MM state of the art facility that will have an unusually high level of short life equipment; 45% of the purchase price is short-life property. For this case, we review the full service option at 45% and the limited service (no site visit) at 41%. The year one depreciation is $2.25 MM with full service and $2.05 MM with limited service. Based on a 30% tax rate, tax savings are $480K in case one and $432K with limited service. Since the business income is minimal, and is expected to remain so for the indefinite future, the limited service may make more sense. Based on the current level of net profit, it would require 45 years to use the extra depreciation with a full service report versus 41 years with a limited service report. Immediately saving $2,500 by omitting the site visit is worth considering in this circumstance.

What Makes Sense for You?

We have professionals available to help you evaluate whichever option you prefer or both options if you want to consider. We suggest reviewing both options so you don’t wonder about it in the future.