Ask an Expert: The Nitty Gritty Details of Cost Segregation Studies

What is a quality cost segregation study?

The IRS defines a quality cost segregation study as “a study that is both accurate and well-documented in the process of classifying, explaining the rationale, and substantiating the cost basis of each asset, while reconciling total allocated costs to total actual costs.”

Can a cost segregation study be preformed on buildings in the past?

Yes. Property owners can prepare a cost segregation look-back study on their current property and re-calculate the depreciation for the previous tax years based on their reclassified asset costs.

When is a cost segregation not a good option?

In order to take the full advantages of performing a cost segregation study on your property, it is recommended to own the property for at least two years or more. If your property is losing money it’s not recommended to perform a cost segregation study. Also, not all commercial properties will qualify for a study. Price valuation is an important factor on whether a study is necessary for the owner or not. Savings must be very significant compared to the costs acquired in performing the study.

If you have any further questions about cost segregation studies, check out our other FAQs here and here or send us your questions below.

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Engineered Tax Services

Engineered Tax Services

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