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COST SEGREGATION PITFALLS

The awareness of using cost segregation to maximize tax depreciation has significantly increased. An added benefit was created by The Tax Act, allowing taxpayers to expense personal property (bonus depreciation).

But buyer beware. Many unqualified persons have entered the "profession" and are masquerading as capable engineers.

Here are the critical questions you need to answer before hiring a cost segregation person/firm:

  1. Verify their credentials. We know one company that hired a home real estate sales person to provide the service. Obviously, the report was an abomination. And, why would this person pretend to know anything about the process?

The person(s) providing the service should have construction or architecture work experience, or an equivalent engineering pedigree. Real estate appraisers may be able to acquire the requisite skill set, but most will never be able to do the detailed work.

  1. How long have they done this work and for whom? Most importantly, how successfully have they defended their work upon an IRS audit?
  1. Is the price commensurate with the service? Obviously, the poorer the quality the more likely that these charlatans will underbid the project and competition. Better paid providers charge higher fees.
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