Cost Segregation FAQ
What is a CSSI® Study?
A CSSI® Study is an engineering-based analysis that reclassifies or segregates real estate components and improvements between real and personal property. This reclassification accelerates the depreciable lives from 27.5- or 39-years to 5-, 7-, or 15-years.
Why haven’t I heard of cost segregation?
Cost segregation was first applied and performed by major accounting firms with in-house cost segregation departments on the largest properties of their most significant clients. Study costs were routinely upwards of $100,000.
The CSSI® study was created using the methods and protocols to deliver this same service to commercial property owners at very affordable rates. By choosing the CSSI® Study, you can take advantage of this tax-saving strategy that was once only utilized by the owners of substantial properties.
Does my property qualify?
Yes, if you:
1.) Cost segregation is frequently completed not only on newly constructed buildings but also on buildings that have been in in-service for many years
2.) Buildings or building improvements with a remaining depreciable basis are potential candidates
3.) Your building or improvement cost basis is at least $200,000
4.) You anticipate holding the property for at least three years
Can I benefit from a CSSI® Study?
If you are a U.S. taxpayer with a tax liability, a cost segregation study can be a lucrative tax strategy. Let us provide you with a complimentary preliminary analysis to determine potential tax benefits.
When should a study be done?
A study can be completed in the year the building or improvements is placed in service. However, the U.S. tax code allows taxpayers to “catch up” on the depreciation that was not claimed from the first day the property was placed in service without amending prior years’ tax returns. A cost segregation study should be considered on any property with a remaining depreciable basis.
What information will be needed to complete a CSSI® Study?
While each study differs, we generally request the following information, if available:
1.) A current tax depreciation schedule
2.) Building cost information
3.) Blueprints or architectural drawings and renovation plans, if applicable
4.) The property will need to be available for an on-site inspection and walk-through
We can assist you in gathering the necessary data.
How does a CSSI® Study work?
Building costs are generally classified for federal income tax purposes into three categories:
1. Tangible Personal Property,
2. Land Improvements, and
3. Real Property.
Each has a different recovery period and method under the Modified Accelerated Cost Recovery System (MACRS). Our engineering-based cost segregation analysis is performed by professional personnel with in-depth knowledge of construction methods, materials, and building components. We perform a detailed analysis to accurately identify the building components and improvements that will be reclassified to take advantage of accelerated depreciation.
Why should I perform a CSSI® Study?
Without a CSSI® Study, your tax professional will only be able to accelerate certain assets. A CSSI® Study provides your tax professional with accurate engineering-based information to establish 5-, 7-, 15-, and 27.5- or 39-year depreciation schedules. When these schedules are applied, there are substantial increases tax savings in the earlier years of owning your property.
How long does a CSSI® Study take?
A CSSI® Study normally takes approximately six weeks from the time we receive all the appropriate documentation.
What will happen in the event of an audit?
Although a CSSI® study has never triggered an audit, if you are under audit for any reason, and the CSSI® Study comes into question, CSSI® will defend the audit at no cost.
Can a CSSI® Study apply to buildings not yet constructed?
No. However, for projects not yet constructed, CSSI® can provide estimates on tax savings from your construction budgets. A CSSI® Study will be delivered when construction is complete.
Why should I choose CSSI®?
CSSI® has been in business since 2003 and has completed tens of thousands of studies. CSSI®’s personnel are experts in cost construction, tax laws, real estate development, and construction experience to maximize your tax savings. Our company will work to help you take advantage of this extremely viable tax savings solution.
If you have any more cost segregation questions, call CSSI® today.