COST SEGREGATION STUDIES
ACCELERATE YOUR DEPRECIATION AND MAXIMIZE CASH FLOW.
Engineering-based cost segregation studies for investment real estate acquisitions and new construction.
Knoxwell Engineering Consultants provides engineering-based cost segregation studies for investment property real estate. Our studies are relevant to both acquisitions and new construction; there may also be a benefit to conduct a cost segregation study on qualifying properties placed in service in prior years. Our approach combines engineering, construction and building evaluation experience to provide property owners and their tax advisers with detailed, supportable property analysis.
Have a property to discuss? Share a few basic details, and we will help determine the appropriate next step.
What Is Cost Segregation?
The IRS acknowledges that components and assets of an investment property wear out over time, and property depreciation is a federal income tax deduction that allows qualifying property costs to be recovered over a prescribed tax recovery period. By accelerating the depreciation of certain assets in a building and improvements to land into shorter recovery periods, property owners may be able to increase near-term tax deductions and improve cash flow. A cost segregation study identifies and quantifies those assets and associated costs that may qualify for alternate depreciation recovery periods.
What types of property should be considered?
Recently acquired or newly constructed commercial, residential rental and other investment real estate
An in-service, non-residential investment property which has recently undergone a significant renovation
Qualifying property owned for several years without a prior cost segregation study
Typical qualifying property types include business office, restaurant, medical/healthcare, multifamily, industrial/warehouse, retail, hospitality, mixed-use, and other commercial real estate.
Why an Engineering-Based Study?
The building matters as much as the spreadsheet. Plans, cost reports, and accounting records tell part of the story. Engineering and construction experience help connect those numbers to the physical building and its individual components. Knoxwell approaches each study with an understanding of building construction, structural systems, building components, site improvements, construction documentation, project cost information, and existing building conditions. We work to identify the full value supported by the property — thoroughly, accurately, and with documentation designed to stand up to review. Our goal is to identify every supportable opportunity for accelerated depreciation while providing clear engineering documentation for you and your tax adviser.
What is the Cost Segregation Study Process?
Initial Inquiry - share key details about the property, including property type, location, acquisition or construction date, total cost basis and placed-in-service date to help us assess your cost segregation opportunities. Be sure to coordinate with your tax professional to ensure a cost segregation study is the right fit for your specific circumstance.
Proposal - Knoxwell will review the information and compile a clear scope for the deliverable, professional fee and anticipated schedule for your review and approval.
Site Inspection - Knoxwell will schedule a site inspection to physically review the property, measure key exterior/interior features and document other pertinent components and details of the property. We coordinate our site work closely with you and your team to ensure minimal disruption to daily operations or tenant activities.
Asset Register Compilation - Knoxwell will review of provided cost records, architectural drawings and field inspection data to perform a detailed component cost breakdown. Utilizing recognized engineering-based cost estimating techniques (such as RS Means data and direct contractor schedule of values), we identify and list each pertinent asset and compile a comprehensive register of assigned costs.
Report - the final comprehensive cost segregation report will include a detailed asset register, summary tables and technical descriptions that provide legal and regulatory substantiation for asset reclassification. Together, they establish a defensible baseline for accelerated depreciation and tax filing.