Episode 13: Cost Segregation

Financial Independence: A Better Perspective

Financial Independence: A Better Perspective is a new podcast hosted by Lance Edwards, bestselling author of “How To Make Big Money in Small Apartments,” and Randy Luebke, Founder of Lifetime Paradigm, Inc., an organization dedicated to helping clients to and through their retirement by fixing broken retirement plans, putting them back on track and making up for both lost time and insufficient savings. In this episode, Lance and Randy interview Todd Strumpfer, Senior Account Executive with Cost Segregation Services. An expert with over ten years of experience, Todd discusses Cost Segregation and how it connects and builds upon standard depreciation. The three also discuss how the CARE Acts plays into it during this time of COVID-19.

What you’ll learn in this episode:

*Cost segregation got its start in the late 90’s. Opening the door to its general use were cases brought by several businesses arguing that parts of their properties wore out fast than 39 years for commercial properties and 27 ½ years for residential rental properties (arbitrary chosen figures). Since Todd started I the business a decade ago, more and more CPAs and tax professionals are recommending it to clients. Jim Shrever, the Founder of Cost Segregation Services, was a pioneer in figuring out how to make this work to the advantage of smaller building owners.

*The IRS allows for depreciation as buildings and inside assets like carpet wear out. If you don’t do cost segregation, you’re doing straight line depreciation. Because of the court cases, the IRS has allowed for building owners to depreciate different items that are part of the property more rapidly.

*A cost segregation study involves going in and getting photos of the property, doing a walkthrough, gathering appraisals and different information. Working with analysts, they do what’s called an engineering-based cost segregation, which is different from accounting based. Engineering based analysis goes deep, with up to 70 building components being analyzed to depreciate a building more rapidly.

*Todd’s company works with a client’s tax professional to apply the results to their tax returns. They have a depreciation schedule going forward that includes much more than land and improvements or land and building. Every component is broken into their correct appreciable life. “They don’t get more depreciation expense, they just get it a lot sooner,” he says. “It’s a non-cash expense.”