Short: Can the Cost Seg Study result vary based on "WHO" does it? Should I shop around?
Long:
Thanks to my awesome CPA, I've learned about STR Loophole and embarking on the first cost-seg study. As a noob, I wasn't sure if cost-seg study varies based on which firm does it. Or does it follow a strict guideline that I should find the firm willing to do it cheapest?
If I should shop around, what are the criteria/questions I should be asking?
The quality of a cost segregation study will DEFINITELY vary based on the firm you hire. This is because the IRS provides a framework for cost segregation, not a bright light method.
The cheaper ones are not as thorough and will not generate as many deductions, they also typically do not go the extra mile and work with your tax preparer to implement the study. One question you should always ask is if the firm performs engineering-based cost segregation studies. This is the highest quality of study that you can get - this type of study will also perform well under audit.
The quality of a cost segregation study will DEFINITELY vary based on the firm you hire. This is because the IRS provides a framework for cost segregation, not a bright light method.
The cheaper ones are not as thorough and will not generate as many deductions, they also typically do not go the extra mile and work with your tax preparer to implement the study. One question you should always ask is if the firm performs engineering-based cost segregation studies. This is the highest quality of study that you can get - this type of study will also perform well under audit.
Cost Segregation Expert and Investor · Lakewood, NJ · Member since 2017 · 1k+ posts · 1k+ votes
3y
@Keetaek Hong I agree with @James Parrish about finding a company that will provide an engineer based "quality" cost segregation study that will hold up in an audit. If your CPA gave you guidance on the STR 'loophole' did you ask them for recommendations for a good cost seg company?
Like many things in life and business, cheapest is not always the best. I would ask:
How long have you been in business, how many cost segs have you done?
Which method of cost seg do you follow?
What kind of experience with STRs do you have? (since that's the type of property you have)
How long does the process take?
Will you stand behind the work in the event of an audit?
There are many companies out there, and several of us represented here on BP. Most companies will provide an upfront feasibility analysis, or estimate, so you can see what the potential savings are, and can report back to your CPA to see if they think it's worthwhile.
Specialist · West Palm Beach, FL · Member since 2008 · 4k+ posts · 1k+ votes
3y
@Keetaek Hong Yes, the quality is dependent on the company or tool that you utilize for your cost segregation study. Here's an article that gives some insight into what to look for in a cost segregation firm.