Who should use cost segregation, and why hasn’t my accountant already provided a study?

This article first appeared in the Albany Business Review, where Christie Ellis, President, serves on the Leadership Trust. She is also a frequent contributor to the NY Real Estate Journal, a university and seminar lecturer, and a member of MENSA and the American Society of Cost Segregation Providers (ASCSP).

Cost segregation provides on average, 3 - 8% of the value of your property, but in some cases as much as 20%, in income tax reduction. It is useful to owners of commercial real estate, and to owners of leasehold improvements. Commercial buildings of any type – warehouse, hotel, restaurant, hospital, gas station, residential rental, etc. all benefit. If you paid in part for tenant improvements in a leased property, this is for you too.

Cost segregation studies require both engineering and in depth, niche tax code understanding to fully comply with the IRS guidelines. Few accountants or accounting firms choose to keep engineers on staff, meaning few firms are equipped to provide studies of the highest quality. Excellent studies require both an accountant and an engineer to tour all buildings as well; a labor concern most accounting firms don’t care to tackle.

The bottom line is that your accountant has a different role in your business than your cost segregation provider. Your accountant is your primary care physician, there to keep your business healthy for the life of the business. If you need heart surgery, your physician isn’t performing it, he’s sending you to a specialist – the role of cost segregation providers.

A 10 minute phone call can usually determine if cost segregation will be useful to you.