Cost Segregation Study - Your DIY Guide to Maximizing Savings

Cost Segregation Study

Your DIY Guide to Maximizing Savings

Introduction to Cost Segregation Study:

According to IRS Cost Segregation Audit Technique guide, you can conduct the cost segregation study on your own for smaller projects but may require assistance for larger projects.

This means the IRS allows you to do your own study, provided you have expertise in construction, taxation, and engineering. So, if you choose to go the DIY route, consider using specialized cost segregation study software to guide and simplify the process, helping avoid common mistakes in your cost segregation report.

Pros of Conducting a Cost Segregating Study Yourself

Cost Savings

The most significant advantage of a DIY cost segregation study is the potential savings.

Learning Opportunity

Doing your own cost segregation study can be an excellent learning experience.

Control Over Timing and Focus

When you handle the segregation study yourself, you have full control over the schedule and the focus areas of the analysis.

Direct Involvement in Asset

By engaging directly in the classification of assets, you ensure that every potential savings opportunity is explored and applied according to your specific situation.

Cons of Using the DIY Approach to Cost Segregation Study

Risk of Errors

The complexity of cost segregation studies means there is a significant risk of errors.

Time-Consuming

Cost segregation studies require a thorough understanding of both tax laws and construction costing.

Complexity and Stress

Managing the detailed requirements and keeping up with the IRS guidelines for a cost segregation study can be stressful for you.

Principle Elements of a Cost Segregation Report

1.Executive Summary: Overview of the study, including key information such as the names of the preparer and taxpayer, date of the study, and a summary of the findings.

2.Detailed Narrative: A section that discusses the rationale, methodology, and specific definitions used throughout the study.

3.Methodology Description: Explanation of how costs were determined for each property unit.

4.Assumptions and Conditions: Statement of assumptions and conditions under which the study was conducted.

5.Certification: A declaration that the report is accurate and complies with the relevant laws, prepared by the listed study preparer.

6.Exhibits: Supporting documents such as photographs, diagrams, and detailed records that corroborate the study’s findings.