For those who live and breathe cost segregation work, there’s an element of surprise surrounding how little most people — CPAs included — know about the tax-savings strategy.“On a recent proposal opportunity, a tax principal and I met with a potential client who owns 15 properties,” said Lawrence Knutson, CPA/ABV and consulting senior manager at Ehrhardt Keefe Steiner & Hottman PC in Denver. “The potential client had developed the properties over the last 20 years. He had a sole proprietor doing his tax return who is retiring. We came in and the first thing we mentioned was cost segregation. He had never heard of it. We see that more and more. I don’t think we’ve fully realized the size of the cost segregation market.”
Cost segregation, or “cost seg” as those in the niche call it, is an engineering-based study of a building, with the goal of allocating as much value as possible to assets with the shortest depreciable life, according to Paul G. DiNardo, a CPA and shareholder of The Cost Segregation Group in Norfolk, Va. It can often save clients thousands of dollars — if they’re willing to invest in a study that will categorize the real and personal property of their real estate.
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