Delivering Measurable Results

K. A. Lindow, CPA, P.C. CPA Firm Firm, Phoenix, AZ.

Real Estate Cost Segregation - Residential Property

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Residential Property Cost Segregation

Your real estate holdings may qualify for an engineering-based cost segregation study. These IRS-approved studies help you accelerate income tax depreciation deductions, generating potentially significant tax savings. Many business owners routinely have real estate cost segregation studies done to save taxes and increase cash flow. For others, this may be a new concept to be evaluated cautiously, since the potential tax-saving results may seem too good to be true. If you're faced with a first-time decision about having a cost segregation study done, read these answers to questions we frequently receive from business owners like you.

Success Story

An investor acquired a property for $4 million either currently or over the past four years. Based on a cost segregation analysis, we determined 30% of the buildings qualified for short-life classifications.

Through the cost segregation study and by filing required accounting method change documents, the manufacturer realized present value cash-flow savings exceeding $300,000 from reduced taxes.

Why Hasn't My CPA Told Me About This?

Cost segregation studies employ engineering and cost-estimating procedures to identify shorter-lived assets qualifying for 5-, 7- or 15-year write-off periods, rather than the usual 27.5 years for building and acquisition costs. Most CPA firms don't have engineers on staff to physically inspect the property, examine architectural/engineering drawings and analyze cost data. Accountants may be able to capture some of the deductions, but without engineering expertise they may overlook substantial portions of a building to achieve tax savings.

What Are Lindow's Qualifications?

Have been and is now associated with, one of the largest cost-segregation service providers in the United States, which has a dedicated team of 10 engineers on staff to conduct these studies. Their combined cost segregation experience adds up to more than 125 years. They have been performing these studies since 1992. Today, they perform hundreds of studies for clients across the nation each year as well as for nearly 100 CPA firms throughout the U.S. that participate in the Alliance for Cost Segregation.

How Much Does It Cost? What Return Can I Expect?

The cost of the study will vary depending on the project and the available documentation. In general, clients routinely receive present value cash-flow savings at least 10 or more times their investment for the cost segregation study. In addition, you may be eligible to receive sales/use tax benefits, property tax relief and other credits and incentives.

Are These Studies Cost Effective?

First and foremost, Lindow is an accounting firm with an 35-year history of providing practical, cost-effective accounting, auditing, tax and consulting solutions for its clients. We don't commit to performing a cost segregation study without providing a free initial evaluation and cost proposal to you. From that, you can evaluate the cost vs. savings factors up front before any work begins. As CPAs, it's our nature not to initiate projects like these unless they provide value for your business.

Do These Studies Raise Red Flags With The IRS?

Engineering-based cost segregation studies to classify depreciation are an accepted standard approved by the IRS. Our experience in conducting successful cost segregation studies means yours is likely to withstand IRS scrutiny and to capture the costs that will earn you tax benefits. The engineers are experienced in segregating costs and applying judicial decisions, IRS rulings and regulations to your situation. We also can help you file the necessary IRS paperwork to help you obtain your tax deductions.

What Types Of Property Are Good Candidates For These Studies?

A cost segregation study can"mine out" buried tax savings from:

  • New buildings presently under construction
  • Existing buildings undergoing renovation, remodeling, restoration or expansion.
  • Purchases of existing properties
  • Office/facility leasehold improvements and "fit outs"
  • Post-1986 real estate construction, building acquisitions or improvements where no cost segregation study was performed (even though the statute of limitations previously closed on the property construction/acquisition year)

For More Information

Cost segregation is highly specialized. We can help you with solutions by providing a free initial property cost segregation evaluation.

To learn more about the paybacks of our engineering-based cost segregation studies, contact me.


Let’s Talk: (480) 940-8351

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