Cost Segregation Fee Options
Fees vary sharply based on whether a site visit is part of the scope of work. Following are typical fees:
Bonus Depreciation / Cost Segregation Fee Options
|Includes On-Site Inspection||$5,000+ (1)||$750 to 1,500 (2)|
|No On-Site Inspection||$2,500 (3)||$300 – $500+ (4)|
- Cost segregation reports including a site inspection typically start at $5,000. Complex properties are more expensive and there can be discounts for a group of properties.
- Typically $1,500 for a single property if a site inspection is included; discounts available for groups.
- Most commercial properties can be reasonably done for a fee of $2,500 if no inspection is required. It may not be appropriate for complex properties and discounts are available for groups.
- Discounts available for groups of 5 or more.
While a lower fee is always preferable to a higher fee, all else being equal, the choice varies with circumstances. The individual without partners is most likely to choose the option without a site visit. Representatives of partnerships, syndications, and corporate entities tend to focus more on reducing risk. The additional fee is really quite modest in most cases, and provides the highest level of results with the lowest risk.
The No Site-Visit Option
Whether or not to include a site visit in the scope of work is the client’s decision. We can counsel on this issue if desired. The tradeoffs are as follows:
- Lower cost with no site visit,
- Likely lower depreciation by 5 to 10% without a site visit,
- However, if you can provide video documentation of the property and other support such as financial records and interviews, much of the benefit of the site visit can be achieved,
- Some taxpayers sleep better knowing the fullest scope of work has been completed.
In reality, we have received about a dozen inquiries from clients being audited by the IRS over 20 years. During this 20 year period, we have completed over 10,000 cost segregation reports.
The key to avoiding trouble with the IRS for a cost segregation report without a site visit, is to be slightly more cautious, so as not to overstate the depreciation. The IRS is concerned about cost segregation reports that grossly overstate depreciation.
Our approach is middle of the road and fully defendable.
- If you receive an inquiry about a cost segregation report we prepared, we will respond until we have satisfied the IRS. To date, we have always been able to explain our analysis with zero changes to studies.
- If you do not save income taxes as a result of our cost segregation report, we will refund the fee in full.