This is a phrase I hear regularly from both building owners and CPAs. When I hear it from building owners, it’s usually something that they picked up from their CPA. The topic might have come up and then the tax advisor says, “I’m not sure it’s worth it” when it comes to doing a cost segregation study.
This just came up recently on a $3MM industrial building we studied. They weren’t sure if it was worth it because of this specific building. The owner was able to take a $300,000 deduction this year because of doing a study. That’s well over $100k in income tax savings and yet prior to getting an estimate from me, they weren’t sure if it would be worth it or not.
We can study buildings with a basis as low as about $200,000 and still make it work for the owner. Almost every building is worth it if there is some basis. Sometimes it becomes a challenge with some 1031 exchange buildings and if you are planning to sell the building shortly. But if you are going to hold it for at least the next 2-3 years, it often makes a lot of sense to do a study.
As always, please consult your own tax advisor to make sure you can take advantage of the increased accumulated depreciation our studies generate. But have that discussion after you have an estimate in hand. Then you will truly be able to make an informed decision about your building and if it makes sense to study it.