Cost Segregation Services with Source Advisors

For companies that own commercial real estate, multi-family housing or tenant improvements, Cost Segregation services are one of the most significant opportunities available to reduce tax liability and increase short term cash flow.

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    Are you a tax professional?

    What is a Cost Segregation Study?

    What is a Cost Segregation Study?

    A Cost Segregation study might be thought of as an interest free loan in that it front-loads the depreciation expense deduction a property would otherwise receive over 27.5 or 39 years.

    Cost Segregation studies free up capital by accelerating the depreciation of personal property (§ 1245) and Qualified Improvement Property (QIP) as well as identifying various expensing opportunities associated with commercial real estate. The accelerated time frame is typically 5, 7 and 15 years rather than 27.5 or 39 years for the building (§ 1250).

    Benefits of Cost Segregation Services 

    The benefits of a Cost Segregation services are typically measured in terms of:

    Increased cash flow generated in earlier years; and the greatest benefit from a Cost Segregation study.Increased cash flow generated in earlier years; and the greatest benefit from a Cost Segregation study.

    Net present value (NPV) of receiving depreciation expense deductionsNet present value (NPV) of receiving depreciation expense deductions earlier rather than prorated over the life of the property.

    When Should a Cost Segregation Study be Conducted?

    The ideal time to have a Cost Segregation service conducted is during the year you are purchasing, remodeling or constructing a commercial property. If you were unable to perform a study when the building was placed-in-service, we might still perform a lookback study which will correct your depreciation schedule going forward and generate a catch up in missed depreciation (§ 481(a) adjustment).

    Eligibility of Building or Improvements

    Placed-in-service since 1987 though, generally speaking, most studies are limited to the last 5-7 years.Placed-in-service since 1987 though, generally speaking, most studies are limited to the last 5-7 years.
    Currently depreciating over 27.5 or 39 yearsCurrently depreciating over 27.5 or 39 years.
    $500,000+ in capitalized costs is a good starting point to begin thinking of Cost Segregation.$500,000+ in capitalized costs is a good starting point to begin thinking of Cost Segregation.
    Have been acquired, constructed, expanded, or remodeledHave been acquired, constructed, expanded, or remodeled.
    The property owner must be a tax-paying entityThe property owner must be a tax-paying entity.

    Ideal building types includeIdeal building types include: Apartment complexes, auto dealerships, banks, casinos, distribution centers, grocery stores, health care facilities, hotels, manufacturing facilities, nursing homes, office buildings, restaurants, shopping centers, sports facilities, warehouses, and other specialized property types. Typically, the more complex buildings will generate the greatest benefit from a Cost Segregation study.

    The Source Advisors Approach to Cost Segregation

    We Don’t Train Our Team on Your Dime

    We only hire heavily experienced cost segregation specialists. We believe experience is critical to maximizing the benefits of Cost Segregation, and the majority of our team has spent between 10 and 20+ years managing Cost Segregation projects. Even our least experienced member has conducted more studies than many who manage projects at large firms.

    Specialized In-house Dedicated Cost Segregation Team

    Our in-house Cost Segregation team is composed of architects, professional engineers, CPAs, MBAs and LEED cost segregation specialists dedicated solely to Cost Segregation. Our management team is involved in every project we’re engaged to perform and often conduct the site visits themselves. And, with rare exceptions, we always conduct a site visit. The IRS expects it, and we believe it is the best way to accurately assess a property.

    We Have a National Presence

    Our project managers are located in all major markets across the United States.

    We Follow the IRS Cost Segregation Guidelines

    Our studies are designed to meet the expectations of the IRS as described in its Cost Segregation Audit Techniques Guide.

    Audit Defense

    Audit defense is included in all Cost Segregation studies that we perform.

    Fixed Asset Services Provided by Source Advisors

    Source Advisors offers several Cost Segregation studies to meet each company’s unique needs and circumstances:

    Cost Segregation – Standard Study

    Cost Segregation – Standard StudyIdentifies §1245 Property (5, 7, & 15 year property (Typ.))

    Cost Segregation – Standard Study§1250 Qualified Leasehold Improvements, Qualified Retail Improvements, & Qualified Restaurant Improvements (15 year straight line property).

    Cost Segregation – Standard Study§1250 Qualified Improvement Property (15 year straight line property and bonus depreciation for §1250 interior improvements after 12/31/2017).

    Cost Segregation – Standard StudyProperty eligible for Routine Maintenance Safe Harbors, De Minimis.

    Cost Segregation – Standard StudyRepairs associated with remodeling of existing buildings.

    Enhanced Cost Segregation

    Our Standard Cost Segregation study that also focuses on prospective tangible property regulations needs

    Enhanced Cost SegregationIdentifies units of property, building systems, and major components.

    Enhanced Cost SegregationStops short of componentizing the §1250 building components.

    Enhanced Cost SegregationThe level of detail is highly customizable depending on the type of property as well as the property owner’s tax strategy and future Tangible Property Regulations needs.

    Dispositions Study

    Current year study only

    Dispositions StudyA detailed analysis of existing assets removed from service in the current tax year for the purpose of creating a dispositions expense; and

    Dispositions StudyIncludes both §1245 and §1250 assets.

    Fixed Asset Review

    Detailed review of a taxpayer’s depreciation schedule

    Fixed asset reviews allows companies to correct past depreciation schedules and maximize depreciation expense deductions, achieving compliance and setting a precedent for managing depreciation schedules going forward. While fixed asset reviews are not a new concept, the opportunities afforded to taxpayers by the Tangible Property Regulations, PATH Act, Tax Cuts and Jobs Act and CARES Act are highly complex and difficult to apply.

    A Source Advisors Fixed Asset Review might include one or a combination of the following services:

    Fixed Asset ReviewCost Segregation opportunities.

    Fixed Asset ReviewRepair opportunities or risks.

    Fixed Asset Review§1245 property improperly capitalized or bonus incorrectly applied.

    Fixed Asset ReviewFull Asset Dispositions.

    Fixed Asset ReviewPartial Asset Dispositions.

    Fixed Asset ReviewOpportunities to apply bonus depreciation.

    Fixed Asset ReviewOpportunities to apply for qualified leasehold, restaurant and retail improvements for year placed in service prior to 2018.

    Fixed Asset ReviewQualified Improvement Property (QIP) for years placed in service after 2015.

    Fixed Asset ReviewQualified Real Property (QRP) for years placed in service after 2017.

    Cost Segregation FAQs

    What if my commercial property business is audited by the IRS - Will Source Advisors be available to help me?
    Yes. At Source Advisors, we stand behind our Cost Segregation services. Our team provides unparalleled studies that result in meticulous attention to detail identifying construction-related costs. To request sample Cost Segregation studies, please Contact Us.
    How long does a Cost Segregation study take to complete?
    A Cost Segregation study typically takes 30-45 days to complete. The Source Advisors team will keep you up-to-date throughout the study and answer any questions you have regarding the services being conducted.
    What information do I need to provide Source Advisors for an estimate?

    The more detailed information you can provide, the better. This ensures a more accurate estimate and we might ask for additional information to clarify our understanding of your particular project and needs. At minimum, we need:

    • Capitalized costs for your project.
    • Years that it was capitalized in.
    • Depreciation schedule, if available.
    • Brief description of your business.
    • Number of floors, square footage of the building site.
    • Property address.
    How much does a cost segregation study cost?
    The IRS specifies the cost of Cost Segregation should be based on the time required to perform the study; not a percentage of the projected or realized savings. The time involved in a study is drive by multiple factors. Here are just a few aspects of the project that will impact the time involved to perform the study: how big is the building; what is the business activity in the building; and how many tax years will be analyzed?
    What is cost segregation in real estate?
    Briefly, Cost Segregation is an IRS recognized tax benefit strategy whereby we identify specific components of a building or improvement project that can be treated as personal property or land improvements for Federal tax purposes rather than real property. The cost for the personal property depreciates over 5 or 7 years and land improvements depreciate over 15 years rather than the 39 years or 27.5 years depreciation for real property.
    Identify your tax exemptions and get results today. Find out if you qualify for Cost Segregation.