Cost Segregation

At Encore Partners LLP, our team specializes in conducting Cost Segregation Studies and identifying opportunities to claim accelerated depreciation for qualifying real estate properties.

Cost Segregation is the practice of identifying assets and their costs, and properly classifying those assets for federal income tax purposes.

In a cost segregation study, certain costs previously classified as subject to 39-year (commercial) or 27.5-year (residential) depreciable life, can instead be classified as personal property or land improvements, with a 5, 7, or 15-year rate of depreciation using accelerated methods.  An engineering-based study allows a building owner to depreciate a new or existing structure in the shortest amount of time permissible under current tax laws.

For every $100,000 of costs shifted from 39-year property to 5-year property, the net present value of the tax benefit is about $16,000 (assuming a 35% tax rate with 5% return on investment).

Substantial tax savings for your property may lie in the floor beneath your feet, within the walls around you or even in the shrubs outside your building.  But only a cost segregation study, performed by a qualified professional firm, can tell you for sure.

Our Process for conducting a detailed Cost Segregation Study includes:

  • Accountant preparing taxesAn inspection of the facility to fully understand its use and condition, as well as to gather information that further supports the classification of capitalized costs into their appropriate class lives.
  • Photographic evidence is compiled for qualifying construction components and included in our report.
  • A review of all blueprints (if available) and the performance of quantity take-offs and cost estimates of personal property not segregated in other cost information.
  • A reconciliation of all construction costs and estimates of the actual amounts incurred by tax life. This step includes adjusting estimates to account for location, time, and physical condition. We also perform an allocation of soft costs to any direct cost in each category to maximize your total benefits.
  • Preparation of a report: Our report complies with the IRS standards stipulated in the (Audit Techniques Guide for Cost Segregation Studies).

Encore Partners LLP has extensive experience completing cost segregation studies for large national Real Estate holdings; further our Commercial Real Estate Tax expertise will collectively maximize your tax benefits through our proprietary methods for the IRS-preferred Detailed Engineering Approach Cost Segregation Studies. What further distinguishes us from both normal tax firms and cost segregation companies is our ability to understand how the results of the Cost Segregation Study affect your business and/or personal tax situation. Our approach to tax services is geared towards working with you to specifically identify your needs to requirements while also establishing clear communications protocols. We will work closely with you to understand your expectations around tax-saving ideas, overall satisfaction, priorities and efficiency gains. Our tax services approach is customized to meet your needs.