Cost Segregation

Cost Segregation is a commonly used strategic tax planning tool that allows companies and individuals who have constructed, purchased, expanded or remodeled any kind of real estate to increase cash flow by accelerating depreciation deductions and deferring federal and state income taxes.

When a property is purchased, not only does it include a building structure, but it also includes all of its interior and exterior components. On average, 20% to 40% of those components fall into tax categories that can be written off much quicker than the building structure. A Cost Segregation study dissects the construction cost or purchase price of the property that would otherwise be depreciated over 27 ½ or 39 years. The primary goal of a Cost Segregation study is to identify all property-related costs that can be depreciated over 5, 7 and 15 years. For example, certain electrical outlets that are dedicated to equipment such as appliances or computers should be depreciated over 5 years.

KBKG goes beyond a traditional Cost Segregation study and will also separate all of the different building structural components (such as the roof, windows or HVAC units) so when they are replaced, a loss deduction can be claimed on them. For leased property, we also separate tenant leasehold improvements.

Cost Segregation Benefits:

  • Generates immediate increase in cash flow through accelerated depreciation tax deductions.
  • Quantifies property’s major components and leasehold improvements so they can be written off when replaced or renovated.
  • Provides an independent third-party analysis that will withstand IRS review.

What is Involved in a Cost Segregation Study?

A quality Cost Segregation study evaluates all information, including available records, inspections and interviews, and presents the findings in a clear, well-documented format. Our process for conducting a detailed Cost Segregation includes: A review of any available cost detail for the property, a review of any available blue prints and a physical inspection of the property. If none of this information is available, a Cost Segregation study can still be performed by estimating component values on site.

When should a Cost Segregation study be conducted?

A Cost Segregation study can be completed any time after the purchase, remodel or construction of a property. However, the optimum time for a study for new owners is during the year a building is constructed, purchased or remodeled. For investors who are in the planning phases of construction or remodeling, the best time to consider a Cost Segregation study is before the infrastructure of the building is set. KBKG offers a free preliminary analysis that can help determine the right timing and strategy for any investor.

Cost Segregation Analysis

Please provide us with the following information, which will allow us to determine if your property will benefit from a Cost Segregation study!



Cost Segregation Calculator

The Cost Segregation Savings Calculator estimates your federal income tax savings and provides:

  • Estimated allocation to 5, 7, 15, and real property
  • Tax deductions and additional cash flow by year
  • Net present value over 10 years and over the life of the property

Enter your building details and instantly receive a detailed report with additional depreciation deductions.

Calculate Your Potential
Cost Segregation Benefits

Cost Segregation Experts

Gian Pazzia, CCSP
Principal » Biography

CJ Aberin, CCSP
Principal » Biography

Malik Javed, CCSP
Principal » Biography

Eddie Price, CCSP
Director » Biography

Lester Cook, CCSP, ASA
Director » Biography

John Hanning, CCSP
Director » Biography

Cost Segregation Webinars

Overview of Cost Segregation
This course will discuss how to measure potential savings and identify clients who qualify for Cost Segregation. » Register

Bonus Depreciation Update
This class will give you updates on Bonus Depreciation and Cost Segregation over the last 2 years. » Register

Cost Segregation Resources

» Preliminary Analysis Request
» History of Cost Segregation
» Savings Calculator
» Cost Segregation Audit Guide
» Cost Segregation Full Case Study
» Complete FAQs

Cost Segregation Case Study

New office building
60,000 square feet building and a lot size of 220,000 square feet.Results: Year one deductions of over $400,000. Year one increased cash flow of $170,000.
10 year sampling study with 125 locations
Results: Millions of accelerated deductions“Since our initial engagement with KBKG was a success, we now engage them to review our fixed asset reporting annually”Big 5 Corporation
Nasdaq: BGFV

Cost Segregation FAQs

What should I consider when selecting a Cost Segregation provider?
You should always read the bio and resume of the persons signing your Cost Segregation study. Make sure they are certified with the American Society of Cost Segregation Professionals (ASCSP). The designation for certified Cost Segregation professional is CCSP and comes after the engineer’s name. Any designation less than that is substandard. Just like you would only use a CPA to file your tax return, you should only use a CCSP to conduct your Cost Segregation study.

Will the company be available if I get audited by the IRS?
Any company can give you a Cost Segregation report with results that saves you a lot of money; the real question is whether it will stand up to IRS scrutiny. The true value of the fee you pay is how easy (or painful) the audit process goes. Every Cost Segregation company will say they stand behind their work, but how can you really know what will happen when the IRS audits the report? Using a larger company that has been in business many years should give you comfort that they can successfully defend your study against an IRS audit. Look at their client profile. Bigger, well-known clients have a higher probability of being audited by the IRS. A company without high profile clients probably doesn’t have a great deal of experience dealing with the IRS. Some companies mislead consumers by stating they’ve done work for companies like Walgreens, McDonalds, or Holiday Inn when in fact they have only worked with smaller franchisee’s or landlords that lease their buildings to such companies.

Does the company have tax experts that can help if my CPA has questions?
There are so many unique fact patterns and situations that can have a tax impact on how the Cost Segregation deductions will flow through on your tax return. A Cost Segregation engineer does not know enough about tax to truly understand how the Cost Segregation deductions will specifically impact you. Using a firm with tax experts on staff will save you money if your CPA has any questions regarding your specific situation. Using a Cost Segregation firm without tax experts means your CPA may have to spend several hours researching the answer and then charge you for that. KBKG has a staff of more than 10 tax experts with over 100 combined years of experience filing tax returns and won’t charge you extra to provide answers we have already researched.

How long will it take to complete the study?
A Cost Segregation study will typically take 30-60 days to complete depending on how quickly we receive the information we need.

How much will a Cost Segregation study cost?
The fee for a Cost Segregation study will range depending on the building size, building type, number of tenants, and other physical characteristics. Typically fees can range from $5,000 to $15,000.

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