FAQ's

Frequently Asked Questions

Q: What exactly is a Cost Segregation Study?

A: A Cost Segregation Study is a strategic tax planning tool that allows companies and individuals who have constructed, purchased, or renovated real estate to increase cash flow by accelerating depreciation deductions and deferring federal and state income taxes. It segregates personal property (depreciated over 5 or 7 years) and Qualified Improvement Property & land improvements (15 years) from the building structure (39 or 27.5 years).

Q: Will a Cost Segregation Study trigger an IRS audit?

A: No. In fact, the IRS has issued specific guidelines (The Audit Techniques Guide) on how these studies should be performed. Because Capital Segregation Services utilizes an engineering-based approach—documenting specific assets rather than using "rule of thumb" estimates—our reports are designed to withstand IRS scrutiny. We provide the detailed documentation the IRS expects to see.

Q: My CPA handles my taxes. Why didn't they do this for me?

A: CPAs are tax experts, but they are not construction engineers. To properly segregate a building's cost, one must be able to read blueprints, understand construction materials, and estimate replacement costs. We do not replace your CPA; we partner with them. We provide the engineering report that gives your CPA the data they need to lower your taxes.

Q: Does this work for older buildings or properties I bought years ago?

A: Yes. This is called a "Look-Back Study." Thanks to IRS Revenue Procedure 2015-13, you can catch up on all the depreciation you missed in previous years and take it as a lump-sum deduction in the current tax year. This is done by filing Form 3115. Best of all, you do not need to amend your previous years' tax returns.

Q: How much does a study cost?

A: The fee varies based on the size, type, and complexity of the property. However, we operate on a clear ROI (Return on Investment) philosophy. We provide a free preliminary analysis up front. If the estimated tax savings don't significantly outweigh our fee, we will honestly tell you that a study isn't right for your property.

Q: What is "Bonus Depreciation" and how does it affect me?

A: Bonus Depreciation allows you to deduct a large percentage of the eligible assets found in our study immediately in the first year, rather than spreading them out. Bonus depreciation will likely apply to all 5, 7 and 15 year property identified through a cost segregation study.  Currently, bonus depreciation is 100% (fully deductible in the first year).  For assets placed into service in prior years, the specific percentage depends on the year the property was placed in service.