All Forum Posts by: Malik Javed
Malik Javed has started 5 posts and replied 70 times.
Post: Cost Segregation Study recommendations
- Specialist
- Los Angeles California
- Posts 75
- Votes 29
@Bradley Hendrix We're a nationwide firm. When considering a Cost Segregation study, here are a few things to consider:
https://www.biggerpockets.com/forums/51/topics/1206189-cost-...
Feel free to reach out with questions!
Post: Cost segregation recommendations for Birmingham, AL
- Specialist
- Los Angeles California
- Posts 75
- Votes 29
@Joshua Wei For SFH check out our RCS software.
When considering a Cost Segregation study, here are a few things to consider:
https://www.biggerpockets.com/forums/51/topics/1206189-cost-...
Feel free to reach out with questions!
Post: Questions re cost segregation study for STR
- Specialist
- Los Angeles California
- Posts 75
- Votes 29
Quote from @Nicole Cotrino:
Thank you! When you say DIY cost segregation - is that something where we still need to find a cost segregation firm, or is that something we would literally do ourselves? We purchased our property for $412k, are in a high W2 tax bracket, and intend to keep the house long term.
In terms of timing, we included expenses for the home in our 2023 taxes but hadn't started renting it yet. Would that mean we would have to use a catch-up adjustment? Or no, since we only started renting it out in 2024?
Some companies also offer DIY cost segregation options, which can be much cheaper. Just be sure you fully understand the process to avoid any mistakes.
When picking a firm, make sure to go with a reputable one. A great place to start is www.ascsp.org, where you can find certified companies.
Also, check out the credentials of the person doing the study. Look for the Certified Cost Segregation Professional (CCSP) designation, which means they’re certified by the American Society of Cost Segregation Professionals. You’d want someone as trustworthy as a CPA for your taxes!
https://www.biggerpockets.com/forums/51/topics/1206189-cost-...
Feel free to reach out if you have any questions!
Post: Cost Segregation -- What is the true benefit of the accelerated depreciation?
- Specialist
- Los Angeles California
- Posts 75
- Votes 29
@Bob Dole - sounds like you've got great insights from many of us here. You're definitely at the right place.
Here is a brief overview on cost segregation:
https://www.biggerpockets.com/forums/51/topics/1206189-cost-...
Post: How to Allocate Land vs. Building Values for Investment Property
- Specialist
- Los Angeles California
- Posts 75
- Votes 29
Quote from @Vicki Karpovich:
Thank you for reviewing these options so clearly. What if the county (or city in my case) has a very low percentage for land compared to the total. It's about 6%. I did review other similar properties in the area (recently sold and not recently sold) and other properties throughout the entire city. It ranged from 3-9% with the majority being around 5-6%. While completing a Cost Seg study, they were very resistent to me using 6% and because of time-sensitivity, I decided to default to the "rule of thumb" method that you mentioned and used 80/20. That impacts me negatively now (compared to 6%), but supposedly was to prevent IRS questioning/audit in the future. At this point, I feel like both were wrong and I should just get a land appraisal. I'm not sure if it's too late to go back and change it now or not, but would you recommend land appraisal it at this point, or do I have enough supporting evidence to use 6%? It was for 2022 purchase filed in 2023 taxes (although we're going to have to file an amendment anyway, so maybe it's not too late??)
In the absence of an appraisal, when purchasing buildings that include the cost of the underlying land, you must allocate the total purchase price between the land and the buildings to determine the depreciation basis for the buildings. To do this, divide the cost based on the ratio of the fair market value (FMV) of each asset to the total FMV of the entire property at the time of purchase.
If you are uncertain about the FMVs of the land and the buildings, you can alternatively allocate the cost based on their assessed values for property tax purposes.
Source: IRS Publication 527 (Residential Rental Property)
Post: How important is getting an account for tax purposes when entering long term rentals
- Specialist
- Los Angeles California
- Posts 75
- Votes 29
@Tyler Bilinovic Congratulations on your recent acquisitions! I completely agree with Austin and Jonathan—having a CPA with real estate expertise is invaluable, especially during your first year. You're definitely in the right place for that support.
If and when you’re considering a cost segregation study, as Jonathan mentioned, don’t hesitate to reach out; I’d be more than happy to share insights on that topic. In the meantime, there are plenty of resources available here to assist you.
Here is one: https://www.biggerpockets.com/forums/51/topics/1206189-cost-...
Post: Cost seg depreciation recapture model
- Specialist
- Los Angeles California
- Posts 75
- Votes 29
@William C. Great question - it depends on the timing of when you buy and sell am investment property.
When a building is sold, the taxpayer or the seller must recapture depreciation previously taken on tangible personal property. Section 1245 recapture is calculated at ordinary tax rates, which leads us to recommend holding the property for at least four years when considering a cost segregation study.
When a property is sold, the fair market value of Section 1245 property may be uncertain. The seller can minimize recapture by allocating more of the sale price to real property instead of personal property. In many situations, personal property in a building may have little to no value. For example, carpeting installed a decade ago likely has minimal worth especially if the new owner has plans to replace it. In this case, it would be appropriate to allocate only a nominal amount, if any, of the building’s sale price to carpeting. A proper valuation of the personal property may yield lower overall recapture tax.
@Ashish Acharya - 1031x can defer cost seg recapture. Many tax professionals were concerned that any five- and seven-year property identified through cost segregation would need to be handled outside of a Sec. 1031 exchange. The final 1031x regulations clarify that nearly all building components identified as five and seven-year property through a cost segregation study are, in fact, real property under Sec. 1031. Compared to pre-TCJA rules, there is no material change in the tax treatment of a building involved in a like-kind exchange, where a cost segregation study has been performed.
Post: Hello, CPA and CSS excited to connect
- Specialist
- Los Angeles California
- Posts 75
- Votes 29
Welcome Jonas! Looking forward to connecting. Feel free to reach out with any questions.
Post: Looking for a Real Estate focused CPA
- Specialist
- Los Angeles California
- Posts 75
- Votes 29
@Rachel Okwumabua It depends...I'd like to know more - perhaps you can send me a private message.
Post: IRA withdrawal to fund investment properties, can a cost seg help to reduce tax bill?
- Specialist
- Los Angeles California
- Posts 75
- Votes 29
Quote from @James Sedano:
thank you everyone!! this is very helpful. what's the average cost for a cost seg?
@James Sedano Costs can vary quite a bit. Typically, a cost segregation study ranges from $5,000 to $15,000. However, if your property is larger or more complex, the cost could be higher. It’s a good idea to get a few quotes to see what works best for you.
Some companies also offer DIY cost segregation options, which can be much cheaper. Just be sure you fully understand the process to avoid any mistakes.
When picking a firm, make sure to go with a reputable one. A great place to start is www.ascsp.org, where you can find certified companies.
Also, check out the credentials of the person doing the study. Look for the Certified Cost Segregation Professional (CCSP) designation, which means they’re certified by the American Society of Cost Segregation Professionals. You’d want someone as trustworthy as a CPA for your taxes!
https://www.biggerpockets.com/forums/51/topics/1206189-cost-...
Feel free to reach out if you have any questions!