CSSI is the premier company providing engineering-based cost segregation studies for U.S. property owners.
Currently, our team has successfully completed over 25,000 studies nationally, and have completed studies of properties ranging from $150,000 to $1.5 billion in cost.
The key to our success with tax professionals and their business owner clients is our highly specialized knowledge.
We often act as an accounting firms back office cost segregation department and are an email /phone call away to answer even the most complex of issues when it comes to depreciation, capitalization VS expenditure decisions and partial asset dispositions and are proud to have a great working partnership with Eric Wallace, CPA; National Tangible Property Regulation expert.
Our services are here to complement (not compete with) the services provided by CPA's, Financial Advisors, or Attorneys.
I truly enjoy collaborating with other professionals to create winning outcomes for all involved. Whether it’s through the services we offer or by making a strategic introduction to a top professional I know and trust can help your current situation; I am here to help.
Feel free to leverage the collective knowledge of my firm and my network! If any of the following areas are of interest, please reach out. I’d be happy to connect you with one or more of my trusted advisors in the following specialized areas:
R&D Tax Credits
Commercial Lending
Advanced Planning Life Insurance
Estate Planning
M&A Advisory
Specialty Real Estate Services; Site Selection, Acquisition roll-ups and development
Captive Insurance
CPA/tax professional referrals
Energy Reduction / LED Retrofit Services
CARES ACT + Cost Segregation = Cash Refunds!
IT’S YOUR MONEY... KEEP MORE OF IT...
To receive your no-cost preliminary property analysis illustrating the estimated tax savings and increased cash flow your property would create from a IRS defined engineering-based cost segregation study, please provide us with the following information:
Generate Additional Cash Flow to Address COVID-19
Can I Still Benefit
Carryback of NOLs
- Allows for a five year carryback of net operating losses arising in 2018, 2019, & 2020.
- The 5 year carryback rules require you to go back 5 years and roll forward from there if the loss is in excess of the carryback years income.
- Example – John Smith has income for the past 5 years, and a loss in 2019 generated from a cost segregation study as follows:
Potential Result: $115,677.50 refund for 2019 tax year
Qualified Improvement Property
- Corrects Congressional oversight in TCJA and now defines Qualified Improvement Property as 15-year property.
- Any Qualified Improvement Property acquired and placed in-service after 9/27/2017 is eligible for 100% Bonus Depreciation.
- Impact: You can now retroactively apply bonus depreciation to Qualified Improvement Property.
- Result: Increases your loss to offset gains and could either reduce taxes now or create an opportunity for a refund now.
Can I Still Benefit
Scenario 1: Purchased or Built a Building in 2019
- Engage to complete a Cost Segregation Study
- Amend 2019 Tax Return
- Amendment must be filed before you file 2020 taxes
- Likely result: increased depreciation
- Refund from overpaying your taxes
- ACTION: Doing this now will generate cash flow to address the current crisis.
- NOTE: Refunds and amendments during economic downturns, such as in 2008, are offered as tax incentives and have not triggered audits in prior history. It is not expected to do so now.
Scenario 2: Owned the building prior to 2019 and previously filed taxes on it
- Referred to as an automatic extension
- This allows certain forms to be used in an amendment (not normally allowed).
- Engage a Cost Segregation Study
- File a 3115 Change of Accounting Form to apply the Cost Segregation Study results to the 2019 tax return
- Must be filed in six months
- This coincides with the September/October extension deadlines
- Result: increased depreciation
- Refund from overpaying your taxes
Actual Client Buildings
What would you do with extra cash flow?
Cost segregation is the method of re-classifying components and improvements of your commercial building from real property to personal property. This process allows the assets to be depreciated on a 5, 7 or 15 year schedule instead of the traditional 27.5 or 39 year depreciation schedule of real property. Thus your current taxable income will be greatly reduced and your cash flow could increase by 5% – 8% of your building’s cost.
Learn More About Cost Segregation
Frequently Asked Questions
Cost segregation is the IRS approved method of re-classifying components and improvements of your commercial building from real property to personal property. This process allows the assets to be depreciated on a 5, 7 or 15-year schedule instead of the traditional 39-year life of real property. Thus your current taxable income will be greatly reduced and your cash flow will increase $60,000 to $100,000 for every $1,000,000 of building cost. This is your money to use now.
The new repair and maintenance regulations are the biggest tax change since 1986. The IRS states that the demand for Cost Segregation Studies is on the rise since the issuance of the final regulations. Compliance with the new IRS regulations is not optional and Cost Segregation is called “the certain method” to getting the calculations right.
First, your existing depreciation schedule must be scrubbed and any items that do not rise to the new level of capitalization MUST be expensed. Regulation 1016–3 says that if this is not done prior to an audit the remaining depreciable basis of the items can be disallowed. The IRS is very serious about this. Second, moving forward there are new capitalization criteria and three safe harbors that can be utilized to expense expenditures that would normally be capitalized. You and your CPA can utilize these safe harbors to strategize about how and when repairs should be made.
Yes. There are three strategies available. You should be proactive and strategize on all expenditures that are over $2,500 for 2020. The first is the de minimus safe harbor limit which all businesses can take advantage of in 2016 and beyond. Any expenditure under $2,500 can be expensed. Second, if expenditures are deemed repair and maintenance, not a betterment, they can be expensed. Third is the small tax payer safe harbor which is an excellent opportunity for commercial and income property owners. Owners would take 2% of the unadjusted basis of each building and write down expenditures under that 2% number.
This is a partial asset disposition. An owner can write off the remaining depreciable basis of assets that went in the trash during a renovation, addition or improvement, including the labor to remove the items. This can only be done in the year of the renovation.
What you do with that money is up to you. Many of our clients use their tax savings to reinvest in their business, purchase property, expand operations, or pay off their principle building payment.
Increase Cash Flow
With less taxable income, you can increase your company’s cash flow significantly. Our cost segregation studies enable you to keep more of the money you make.
As a commercial property owner, you can receive cash flow from tax savings of 6-10% of your building cost within the first five years of ownership. That’s $60K-$100K for each $1M in building costs.
Common Misconceptions
FALSE. Here’s the truth…
Fifteen years ago when Cost Segregation first hit the marketplace, studies were performed only on very large multi-million dollar buildings for companies with deep pockets. There was no effective method in place to analyze a building without multiple site visits and many specialists lending their expertise on-site to the project which drove the cost of the studies through the roof. As technology has advanced, the engineering-based cost segregation study, which the IRS recognizes as the most thorough, has become very affordable. The ROI for building owners is very compelling. Cost Segregation allows commercial property owners to free up investment capital to grow their businesses using their own money.
FALSE. Here’s the truth…
Cost effective studies are being done daily on buildings with a cost basis of $300,000 and on renovation projects as low as $200,000.
FALSE. Here’s the truth…
Many do not realize that 25% – 50% of a building’s cost can be redefined as a short life asset. Combine this large percentage with the low cost fee, and a significant return on investment can be realized. Even when a CPA accelerates some depreciation, an engineering-based study will uncover significant amounts of hidden opportunity.
FALSE. Here’s the truth…
Cost Segregation can be applied in any tax year for qualifying buildings without amending prior year returns. Change of Accounting Method (IRS Form 3115) is automatically approved with an engineering-based Cost Segregation study. The benefit to a “look-back study” is pulling all of the accelerated depreciation forward into the current year as if this method had been applied since the first year of ownership. Qualifications are:
- Building must have been acquired or renovated after 12/31/1986
- Owner must be a taxable entity
FALSE. Here’s the truth…
Cost Segregation technical analysts will cost analyze a building, its structure, its systems, and its costs. A study completed by an individual having construction technology and experience is considered by the IRS to be the most reliable and thorough type of study. Where receipts are helpful, the practice of delivering lump sum pricing in construction projects will require construction technology expertise to identify all the component items buried in these bids that qualify for short-term depreciation.
FALSE. Here’s the truth…
It is all about the time value of money. A dollar today is worth more than a dollar tomorrow. An engineering-based Cost Segregation study helps building owners maximize this basic accounting principal.
FALSE. Here’s the truth…
Engineering-based Cost Segregation studies have been upheld as appropriate, valid since 1997, and no riskier than any other legitimate deduction. Since the 2014 Tangible Property Regulations have triggered a landslide of questions, Cost Segregation is the certain method to finding the answers.
FALSE. Here’s the truth…
For buildings placed in service in prior years, owners should complete IRS Form 3115 and make a 481(a) adjustment for the current tax year. This allows owners to bring forward the total of all allowable deductions which were not taken without amending prior year returns. Excess deductions can be carried forward until used.
FALSE. Here’s the truth…
IRC Section 469 provides three specific exceptions to the grouping activities restriction that covers a very high percentage of commercial property owners. These three ways are the most common ways that a taxpayer may be allowed to use the cost results without limitations of the amount of passive income.
Hear From Satisfied Clients
Cost segregation is tax strategy used by commercial property owners to significantly reduce taxable income and increase cash flow. Once used only by the largest accounting firms and real estate owners, this practice has now become routine for commercial and residential properties of almost every size.