As we all know, IRS rules and regulations are extremely complex. Cost segregation involves not only specialized tax law knowledge but construction engineering expertise such as the ability to read blueprints and building specifications. Even if your accountant understands the basics of cost segregation, without contractor/engineer expertise and a deep understanding of the relevant tax law changes, IRS Private Letter Rulings and court cases, valuable tax benefits will certainly be missed. IRS cost segregation audit guidelines clearly state that “a study by a construction engineer is more reliable than one conducted by someone with no engineering or construction background.“
If your accountant is currently using the straight-line method of depreciation, it is highly likely that anywhere from 15% to 50% of building components can be reclassified to shorter depreciable lives, resulting in significant tax savings. On buildings where the owner has made substantial renovations, 90% of the costs could potentially qualify for accelerated depreciation, even where the building has been fully depreciated.