DIY Options to Reduce the Cost of Cost Segregation
DIY Cost Segregation results can be improved to generate more depreciation and be more accurate with a limited amount of effort from the property owner. The cost segregation appraiser needs information about the condition of the property at the time of acquisition (whether that is now or in the past). He also needs information about the current condition of the building and about 100+ specialized items.
It is likely we could miss some of the unusual items without video, photos and communication with the owner representative. This process does not need to be time consuming, unless the property is highly complex (shopping mall attached to office building), in which case it is not a good candidate for cost segregation without an inspection.
Income and expense data along with a copy of the general ledger can also be helpful if we are not including a site visit in the scope of work. The items which qualify for short-life depreciation are not intuitive. For example, HVAC, roofs, exterior paint, wiring and the plumbing system generally do not qualify. Surprising, huh?
Win – Win
Have your team spend a bit of time providing the information needed. We do not need it until after the preliminary analysis. So until you decide whether to proceed, there is no work for your team. O’Connor DIY process is a win-win. You get virtually all eligible additional depreciation:
- prepared in a credible manner,
- with a credible result and
- documented appropriately.