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Tax, SDIRAs & Cost Segregation

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Greg Heden
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Cost Segregation Study on Existing Commercial Buildings

Greg Heden
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Posted Nov 16 2022, 08:03

I am looking at a pretty big tax bill FYE 2022 and really could use some extra depreciation.  Open to acquiring some more investment property,  but unlikely before end of year.   Can I or does it make financial sense to do a cost segregation study on the commercial office buildings that I have owned for 15-17 years? Appreciate any direction on this.  

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Yonah Weiss
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Yonah Weiss
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Replied Nov 17 2022, 05:32

@Greg Heden You 'can' do a cost seg on a property owned for that long, but since almost half of all the depreciation has already been taken, you will have much left to work with. Take a look at your most recent depreciation schedule (or have an expert look) and see what the remaining tax basis is. 
Doing what we call a 'look-back study' allows you to catch up the accelerated depreciation that you could have taken that you missed, without having to amend previous years' tax returns. You will need to file a form 3115, a change of accounting method.

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Greg Heden
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Greg Heden
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Replied Nov 20 2022, 18:23

Ok, is this something your company can do?

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Replied Nov 20 2022, 21:22

Is there an easy/cheap way to do a cost seg?  I am looking to do for for my single family rental I put into service this year

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Yonah Weiss
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Yonah Weiss
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Replied Nov 21 2022, 02:28
Quote from @Greg Heden:

Ok, is this something your company can do?


 Yes, but BP does not allow self promotion :)

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Julio Gonzalez
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Julio Gonzalez
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Replied Nov 21 2022, 08:05

@Greg Heden Your property definitely has the potential to benefit from a cost seg study. Determining whether to do a cost segregation study or not has a lot variables such as purchase price, land values, if it's passive activity, etc. Most cost segregation companies provide a free cost/benefit analysis quote to help you determine the potential tax benefits of the study.

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Bonnie Griffin Kaake
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Bonnie Griffin Kaake
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Replied Nov 22 2022, 15:21
Quote from @Greg Heden:

I am looking at a pretty big tax bill FYE 2022 and really could use some extra depreciation.  Open to acquiring some more investment property,  but unlikely before end of year.   Can I or does it make financial sense to do a cost segregation study on the commercial office buildings that I have owned for 15-17 years? Appreciate any direction on this.  

It may. It depends a lot on how much remodeling and repair you have done over the years. The best way to find out is to send your latest depreciation schedule to a good cost segregation company for a no-cost estimate. And, do you plan to keep those office buildings for at least 2-3 years or do you have plans to sell or 1031 them into new properties? There are too many unanswered questions to give you definite answer. If you have done a lot of repairs and remodeling over the years, you may be surprised at how much was capitalized in the past that could actually be expensed off that depreciation schedule as well. 

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Greg Heden
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Greg Heden
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Replied Nov 22 2022, 21:03

Thanks for the invite.  I bought them all as shell properties and designed/built-out the interiors.  Also, have updates over the years.  i do intend to keep for the foreseeable future since i utilize a portion of the properties in my business. Any suggestions on CS business to get an idea?  Thanks Again!

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Michael Plaks
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Michael Plaks
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Replied Nov 22 2022, 21:41
Quote from @Greg Heden:

Any suggestions on CS business to get an idea?  Thanks Again!


Greg, two resident experts owning CS companies already responded to you - and you continue to ask for recommendations? Contact those two.

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Yonah Weiss
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Yonah Weiss
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Replied Nov 23 2022, 06:20
Quote from @Michael Plaks:
Quote from @Greg Heden:

Any suggestions on CS business to get an idea?  Thanks Again!


Greg, two resident experts owning CS companies already responded to you - and you continue to ask for recommendations? Contact those two.


 Which one of the three of us should be offended? 😂

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Greg Heden
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Greg Heden
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Replied Nov 29 2022, 11:06

I wasn't sure they were interested since their was no solicitation. Left a message for one and never heard back.  I'll try again....

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Michael Plaks
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Michael Plaks
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Replied Nov 29 2022, 11:44
Quote from @Greg Heden:

I wasn't sure they were interested since their was no solicitation. Left a message for one and never heard back.  I'll try again....


They are not allowed to solicit on BiggerPockets.

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Greg Heden
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Greg Heden
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Replied Nov 29 2022, 13:46

Got it.  Thx-

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