Anyone use SimpleSeg cost segregation study? They advertise they can provide a study for under $300 in 10 minutes for residential under $500K.
I have a home on the market I’m planning to 1031 exchange. Does it make sense to do a Cost Segregation study before I sell if it costs under $500?
I get that if the study costs 5-15K it may not be worth it because of the new tax basis.
If its an investment property that you acquired a couple years ago...It depends but If you decide to do so, you are talking about a lot of admin work from having to do the change in accounting method/calculations.
You may want to consider doing it after you do the 1031 exchange with the new property.
One thing to consider - Will the cost segregation company protect you in the event of an audit?
Can you share what company name and contact info?
@Tatyana Baytler - she did share the company name - SimpleSeg.com. You can also look into KBKG.com.
You want to make sure to read the disclosures. Most will state that a “simple seg” or a purely rule of thumb cost segregation will not hold up under audit. Up-front cost is a huge consideration when considering CS but it isn’t the only one. Nor is accelerated depreciation. Take a rental property for example. The roof will not get an accelerated schedule, however having a cost and square footage broken out will extremely useful in the case of damage.
None of this useful information is provided for a “simple seg.” For this property, maybe that’s ok, but rentals seem to have higher disposal than other property. Best of luck!
If you are about to sell, doing a cost segregation study is only needed for specific tax strategy. That should be discussed with your CPA and what you are trying to accomplish. If you are rolling the proceeds into a 1031, that will only allow you to segregate the "step-up" value above the 1031 funds.
Regarding on-line models, they have benefit if no asset detail is needed. They also tend to be conservative in benefit. It's important to understand how the model works, and what your goals for a cost seg study are. Scott is right, with no asset detail they will not stand up against an IRS audit - though there are plenty of 'so called' engineering studies that will not stand up very well either. Though for lower cost properties (under $1M), where a lot of improvements aren't needed, they are quick and easy and can give the CPA 5, 7, 15 and 27.5 numbers needed to file your taxes
www.DIYcostseg.com offers a fully modeled solution for under $500 on residential (1-4) properties that is completed in minutes. It also has a $195 "Audit Protection" option, which means if you go under audit, the firm will conduct a "fully engineered study" and defend you against an audit. Its essentially an insurance policy. So you are protected. Besides residential, DIY also covers all types of commercial properties for $1,295 with an improvement basis of under $1M. Though again, it will err to the conservative. That said, plenty of properties under $1M can be fully justified to order traditionally engineered cost segregation study. It all boils down to your needs and objectives.
@Bill S. Thank you a lot for this info!
Account Closed a cost seg study done in less than 10 minutes definetly sounds like they are using the estimating method, which the IRS isn't too fond of. In order to execute an accurate study that will hold up in the case of an audit, it's imperative you find a cost seg company who utilizes the engineering based method. This is the most reliable method as it utilizes hard data. The engineering method will take longer than 10 minutes, I can guarantee that :)