Frequently Asked Questions

Get answers to some of the most common questions we get asked about cost segregation.

Will a cost segregation study (CSS) increase my chance for an audit?

No. Using a CSS is encouraged by the IRS on all CRE property and does not raise a red flag to the IRS. In addition, ELB’s methodology is bullet-proof in the unlikely event of an IRS audit. Should you experience an audit, ELB provides lifetime defense of our study at no added cost.

How much can I typically benefit from having a CSS study?

Depending on building type and use, owners will typically realize between 18% and 48% of improvement values in tax benefit. Some special use properties; like manufacturing, data centers, and greenhouses, can deliver even higher tax benefits.

What is the difference between a “fully engineered and accounted” study, and an ‘engineering-based’ study?

ELB performs what is called a “fully engineered and accounted” methodology, which is forensic in its detail of both accelerated property (5, 7, and 15 year items) as well as the straight-line (39 or 27.5 year items), which maximizes the allowable IRS deductions. The typical ‘engineering-based’ reports on the market do not provide the same level of detail in accelerated property, and usually bundle the straight-line property in just a few categories.

Why does this matter? First, ELB’s “fully engineered and accounted” methodology delivers complete asset management detail on all accelerated and straight-line items. The engineering-based studies identify just the standard items and miss the hidden electrical, plumbing and mechanical details, leaving your money on the table. Secondly, ELB’s report serves as an asset management report allowing you to easily identify future abandonment/disposition of items for future upgrades, improvements or repairs, in full compliance with the IRS Tangible Property Regulations.

When is the best time to have a CSS Study performed?

The best time to have a CSS Study is now. Whether recently acquired, constructed or you have owned your property for 5-12 years, you are entitled to these federal tax benefits. Many people believe that cost segregation only works in the tax year built or acquired or improved. Though our ‘Look Back’ study can reclaim valuable unused tax benefits on a property you may have depreciated in a straight-line method for years, without having to amend past years tax filings.

Why hasn’t my CPA told me about this, or are they already doing it?

Probably not, or at least not with the appropriate level of engineered detail to defend in the event of an IRS audit. CPA’s are not engineers, or aware of all the engineered aspects of a Cost Segregation Study, and while they can identify residual numbers and provide tax benefit, though this approach is usually not backed with asset detail. Many CPA’s choose to partner with ELB for this reason, to have a bullet-proof report and the asset management detail for any future abandonment and disposition needs.