Cost segregation

Improve your cash flow and
lower your tax rates.

Tap into the benefits of a cost segregation study

Any individual or company that has acquired, built or renovated a building within the past 10 years likely has significant opportunity to improve cash flow and lower tax rates through an engineering-based cost segregation study.

See how our cost segregation studies could help your organization.
Contact us to learn more.

Cost segregation studies

Consider who benefits

Organizations with new buildings currently under construction or recently completed

Organizations with purchases of existing properties

Organizations with existing buildings that have undergone renovation, remodeling or expansion

Organizations with leasehold improvements

Consider the benefits

Improve cash flow due to lower taxes from accelerated depreciation

Provide detailed cost data for compliance with final regulations for expensing vs. capitalization

Increase in cash flow helps offset total project costs and could allow more extensive or timely facility improvements, acquisitions or renovations than originally projected

Engineering-based cost segregation provides an independent third-party audit trail for depreciation classification of assets (compared to less stringent, less accurate percentage-of-project cost estimates sometimes used by firms without cost segregation specialists)

How AGH's cost segregation studies can help your organization

Cost segregation studies “carve out” the personal property costs associated with a building project and reclassify them to the appropriate shorter tax life – often 5, 7 or 15 years instead of the 39 years or 27.5 years for nonresidential or residential rental real property, respectively, used to depreciate real property.

The tax laws signed into law in 2017 have more favorable bonus depreciation rules and expanded definitions for Qualified Improvement Property (QIP) which allow cost segregation studies to provide additional value. Bonus depreciation on eligible assets is going from 50 percent in 2017 to 100 percent on property placed in service after September 27, 2017, and on or before December 31, 2022. Thus, the greater the amount of shorter life property identified in a cost segregation study, the greater the benefits.

How we conduct our studies

Similar to a research and development tax credit study, there is no cost to you for AGH to conduct an initial scoping to determine whether your company could potentially benefit from cost segregation. This initial scoping provides an estimated benefit to you. Once the initial scoping is completed, we provide the estimated cost to complete the study so a final decision to move forward can be made. Our fee is 100 percent deductible and, in general, clients routinely receive present value cash-flow savings of 10 to 20 or more times their investment for the cost segregation study.

Our studies involve the following steps:

Investigation of the property

Review and reallocation of related costs

Recommendations and report

Sample case studies

Below are a few examples of how a cost segregation study could improve your cash flow.

Property: Industrial manufacturing and assembly office

Purchase of an existing 93,519-square-foot office warehouse used for assembly and manufacturing of industrial earth-moving and construction equipment

Project cost: $ 5,100,600
Property basis reclassified: $ 1,570,000
Increased cash flow first five years: $    550,000
Property: Four automobile dealerships — showroom remodel projects

Demo existing showrooms down to shell, move interior and exterior walls and remodel

Average project cost: $ 2,167,318
Average property basis reclassified: $    717,565
Increased cash flow first five years: $    223,419
Additional current year write-off
for partial asset dispositions and removal costs:
(average per location)
$    383,402
Property: Apartment complex

New construction, multi-building apartment complex, clubhouse and pool

Project cost: $ 16,935,000
Property basis reclassified: $   4,687,000
Increased cash flow first five years: $   1,447,000
Property: Indoor and drive-up bank

New construction for bank in a single-story, 4,500-square-foot building with indoor banking, offices, vault and drive-up tellers

Project cost: $ 2,200,000
Property basis reclassified: $    660,000
Increased cash flow first five years: $    200,000
Property: Independent and assisted-living center

Combined 111,000-square-foot independent and assisted-living center with 185 rooms and 5.8 acres of grounds

Project cost: $ 11,450,000
Property basis reclassified: $   2,260,000
Increased cash flow first five years: $      600,000

Potentially improve your cash flow. Click to get started.

Bruce Stubbs, JD, LLM

Senior Vice President
AGH Specialized Tax Solutions, LLC

Bruce Stubbs has more than 20 years of legal and tax consulting experience. His past 18 years have been devoted to research & development (R&D) tax credit services, cost segregation, and fixed asset tax issues, including the repair versus capitalization issues — also known as the repair regulations. He has more than 18 years of experience in public accounting providing tax consulting services to clients across all industries, including retail, hospitality and health care entities ranging from assisted living to full-service hospitals. Bruce’s practice also covers manufacturing applications including aircraft and aircraft components, plastics, electronics, custom job shops, industrial and commercial, and computer software development.

Bruce’s undergraduate degree is in accounting. He also earned his juris doctorate (JD) from Washburn University School of Law and his master of laws in taxation (LLM) from the University of Denver School of Law. Bruce is a frequent speaker for CPA and business groups about specialized tax topics such as research and development tax credits, cost segregation and the expensing versus capitalization regulations.