357. Cost Segregation Done Right: How In-Person Engineering Maximizes ROI with Edward Griffith

Summary

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Podcast Summary:

Tax Smart Real Estate Investors Podcast
Episode 357: Cost Segregation Done Right: How In-Person Engineering Maximizes ROI with Edward Griffith
Release Date: December 9, 2025
Host: Hall CPA
Guest: Edward Griffith, Director of Cost Segregation, Hall CPA

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Episode Overview

This episode dives deep into the nuts and bolts of cost segregation for real estate investors. Host Hall CPA welcomes Edward Griffith, their new Director of Cost Segregation, to break down the engineering and tax strategy behind cost seg studies, what makes an in-person approach superior, and how recent IRS guidance changes the landscape. The conversation covers when and how to perform cost segregation, what property types see the highest ROI, the difference between software and engineering-based studies, key timing issues, real-life scenarios, and actionable advice for investors.

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Key Discussion Points & Insights

1. Introduction to Edward Griffith and Cost Segregation

• Edward’s Background: 15 years of experience in property analysis and cost segregation, previously ran a national firm’s cost seg practice. (01:58)
• What is Cost Segregation?
  • "The whole point really obviously is just to move as much stuff from that 39 year or 27 and a half year bucket down to the five and 15 year bucket." — Edward Griffith [02:48]
  • Cost segregation breaks down a property into components that can be depreciated over 5, 15, or 27.5/39 years, instead of just the longest depreciation schedule.

2. Why Cost Seg is So Powerful

• Accelerating depreciation saves significant tax dollars, especially by leveraging bonus depreciation.
• Edwards explains that components like plugs, drywall, fixtures, etc., qualify for shorter-life buckets when broken out.
• Critical for strategies involving Real Estate Professional Status (REPS) and short-term rentals. [03:56]

3. Which Properties See the Best ROI from Cost Seg?

• General Rule: Properties with significant site improvements (parking lots, landscaping) yield higher ROI.
  • "Houses are usually 20 to 30%...RV parks, mobile home parks, those kinds of things, you can really start seeing 60%, 70%, just really large benefits." — Edward Griffith [04:50]
• Highest ROI: Mobile home parks, RV parks, properties with lots of land improvements.
• Lower ROI: Warehouses, due to minimal reclassifiable assets ("just a shell").
• Key tip: The more complex the property’s site improvements, the greater the depreciation benefit.

4. Depreciating Land Improvements vs. Land

• Clarification: Land itself is not depreciable, but landscaping/land improvements are.
  • "Landscaping and land improvements, you can. So if we're adding sod or seeding the grass...we absolutely can and can depreciate." — Edward Griffith [07:57]
• Be diligent about the purchase price allocation between depreciable assets and land value, especially in high-land-value markets.

5. In-Person Engineering vs. Software-Based Cost Seg Studies

• Software Studies:
  • Originated to provide cheap, quick options for small investments.
  • Typically do not check all the IRS Audit Technique Guide (ATG) boxes (methodology, site visit, documentation, etc.).
  • Riskier for audit defense under recent IRS scrutiny.
• In-Person Studies:
  • Satisfy more (often all) ATG requirements, provide defensible, higher quality results, and usually yield better financial benefit due to more accurate detail.
  • "Usually when you're on site, the good news is you can usually pick up a few extra percentage points in terms of your benefit." — Edward Griffith [09:12]
  • IRS is reviewing these more closely with a new Audit Technique Guide, making compliance critical.
• Quick Summary:
  • "An in-person study is probably going to hit all the boxes that the IRS can look for in the Audit Technique Guide...you'll have an easier time when you go to audit." — Host [13:12]

6. Timing: When to Do a Cost Seg Study?

• Common myths: You don’t need to do a cost seg before purchase or in the placement year.
  • "You usually want it done a month or so before you're going to file." — Edward Griffith [14:24]
• You can do "look-back" studies for properties acquired in earlier years.
• Preferably perform the study after renovations to avoid double-counting, unless renovations occur much later.
  • "Usually the best scenario is...wait till everything's set and done." [14:44–16:05]

7. Treatment of Disposed Assets in Renovations (Partial Asset Dispositions, PADs)

• Partial asset disposition is generally not available if disposition is in the same year as placement in service.
  • "Most people, they're just not going to do a partial asset disposition if it's the same year that they're placing it in service." — Edward Griffith [16:34]
• If disposed in a later year, PAD rules may apply, but there’s a gray area for small value assets. [16:05–17:19]

8. Step-by-Step Cost Segregation Process with Hall CPA

• Initial Call: Assess property, fit, and projected benefits.
• Proposal/Estimate: Upfront fee and estimated tax benefits.
• Engagement: Sign engagement, schedule site visit.
• Site Visit: Qualified professional documents building; often uncovers additional reclassifiable assets.
• Report Compilation: Robust, IRS-defensible 50–70 page report with executive summary and line-by-line breakdown.
• Timeline: Usually 1 month from start to finish.
  • "You have the report done and you'll know how much money you're going to save on your taxes." — Edward Griffith [17:59]

9. 2025 Bonus Depreciation & Regulatory Changes

• New Law: Return to 100% bonus depreciation for assets placed in service after Jan 19, 2025. (It had been phasing down to 40% in 2025.)
  • "Huge win for all real estate investors out there." — Edward Griffith [04:50]
• If You Closed Before Jan 19, 2025:
  • Most likely subject to old 40% rule, unless you qualify via component election, 10% safe harbor, or demonstrate the contract was non-binding.
  • "There's a lot of different workarounds. It's mostly on a case-by-case basis." — Edward Griffith [19:46]

10. Edward's Top Two Cost Seg Advice Points for Investors

• 1. Think about land improvements: Know the makeup of your purchase for max benefit.
• 2. Know the new IRS scrutiny: In-person, full-engineering studies will be worth the cost for audit defense and maximizing ROI.
  • "Just making sure that you understand kind of the new set of risks moving forward..." — Edward Griffith [21:49]

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Notable Quotes & Memorable Moments

• "If you're going to be doing cost segregation anytime this year, in 2025 or beyond, this is an episode you don't want to miss." — Host [00:34]
• "You definitely can’t depreciate land, but landscaping and land improvements, you can. So if we're adding sod or seeding the grass...we absolutely can." — Edward Griffith [07:57]
• "Usually when you're on site, the good news is you can usually pick up a few extra percentage points in terms of your benefit." — Edward Griffith [09:12]
• "If you do what they're looking for, then you're not going to have as many problems." — Edward Griffith [13:40]
• "The important part is the front page has a summary on it and that's where you're going to find your five year and 15 year...that's what your CPA is going to want to see." — Edward Griffith [17:59]

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Timestamps for Important Segments

• 01:58 — Edward Griffith’s background and intro to cost segregation
• 02:48 — What is a cost seg study and why it matters
• 04:50 — What property types offer the best ROI in cost seg
• 07:57 — Land vs. land improvements depreciation explained
• 09:12–13:12 — In-person engineering vs. software studies & Audit Technique Guide
• 14:24 — Timing: When to perform a cost seg study (including after renovations)
• 16:05 — Partial asset dispositions in renovations
• 17:59 — Cost seg process for Hall CPA clients: Step-by-step breakdown
• 19:40–21:37 — How recent bonus depreciation law changes affect current/planned investments
• 21:49–22:28 — Edward’s key advice for investors considering cost seg

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Takeaway for Investors

• In-person engineering-based cost segregation studies are now more valuable (and necessary) than ever, both for maximizing tax benefits and withstanding increased IRS scrutiny.
• Understanding land improvements, timing your study around renovations, and knowing how to navigate new bonus depreciation rules are all essential for optimal results in 2025 and beyond.

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For more info and to book a call with Hall CPA for cost segregation, visit TheRealEstateCPA.com/Podcast.

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Transcript

[A]

You're now listening to the Tax Smart REI Podcast, the number one tax podcast for real estate investors.

[B]

Your source for all things real estate accounting and tax. Here we reveal our secrets that can save you thousands in taxes, streamline your accounting process, and help grow your business. Stay tuned to hear insightful interviews with industry experts, successful real estate investors, and current clients on what strategies they use to grow their business and how they steer clear of Uncle Sam.

[A]

Hey, thanks for tuning into this week's.

[C]

Episode of the taxmart REI Podcast. Today we're back with another episode about cost segs. We're joined with Edward Griffith, who is the director of Cost Segregation here at hall cpa. We're going to be diving into the entire process of cost segregation, the benefits, the timing issues that we often get questions about, as well as the importance of on site visits, so on and so forth. If you're going to be doing cost segregation anytime this year, in 2025 or beyond, this is an episode you don't want to miss. We'll be diving into all that in just one minute.

[A]

It's that time of the year again, the New Year's right around the corner. If you've been listening to the podcast all year thinking I really need to get proactive about my tax strategy, then this is your moment. Because the truth is, you probably don't even know how much money you're leaving on the table. At Whole cpa, our team helps real estate investors and business owners save thousands of dollars through proactive year round tax planning. Whether you're looking to optimize cost segregation, leverage the real estate professional status or short term rentals, or structure your investments for maximum tax efficiency, then we've got you covered. But here's the deal. Spots for new clients are limited as we approach year end, so if you want to lock in your strategy before tax filing hits, don't wait. Check out the link in the show notes to request a consultation and start working with our team before you miss another opportunity to keep more of what you earn.

[C]

All right, and we're back. So Edward, thank you so much for joining us here today. This first time you're here on the show, would you be able to give our listeners just a little bit of information on your background and your experience with cost segregation?

[D]

Yeah, thanks man. Nice to be here and good to talk with you guys. As always. You know my background, so I have about 15 years or so experience in property analysis and cost segregation and prior to joining hall cpa, I used to run the cost practice at a giant national Accounting firm. So excited to be here and glad they were able to kind of steal me away to run the show here. And it's been a great month or two so far.

[C]

Awesome, awesome. We're glad to have you on the team. And cost segregation study is a very important element of the tax planning and the strategies that we use here at Hull cpa, all the real estate investors who are tuning in. So, you know, I know we covered this ad nauseam here on the show, what cost segs are, use cases, so on and so forth, but there's always new people tuning in. And also it's important to get the take of an expert on this. So what is the definition of a cost segregation study and why is it so beneficial to real estate investors?

[D]

Yeah, so I mean, the cost segregation study, the whole point really obviously is just to move as much stuff from that 39 year or 27 and a half year bucket down to the five and 15 year bucket. So that's kind of the name of the game. And you know, it's kind of all based off of case law and revenue rulings. And there's also a cost segregation audit technique guide that they kind of sheds some light on the path we should follow. So the really the big benefit is, you know, normally when you buy a property, you depreciate it and you put it all in one bucket. And with cost segregation, we can kind of look a little closer and go through the building and go, hey, this, you know, maybe you're at your, you know, your house right now, listening, watching on your PC or something. You can look where the PC plugs into the wall and we can actually say, hey, this, this plug here where it plugs into the wall, this is actually five year property. It's not really supposed to be depreciated as the rest of the building. So we kind of take that mindset and we apply it to all the different line items of the whole house. You know, drywall and flooring and fixtures, plumbing fixtures, electrical fixtures and so forth. And so the end result is you kind of have this, you know, report, this huge report that kind of documents all this and you get a tax deduction because you get to put things in a 5 and a 15 year bucket that allows for immediate expensing and depending on the year placed in service.

[C]

Right? Super critical, super critical stuff for everybody out there who's using strategies like reps, short term rentals, or just trying to accelerate deductions for maybe passive purposes. Cost segregation studies are critical because like Edward said, if you Have a commercial Property, it's over 39 years. That means you're depreciating just a little bit of the property's value a little by little over 39 years if it's commercial or 27 and a half years if it's residential. But there's obviously more components in that that have a lower depreciable life and cost segregation breaks them all out and allows you to deduct it much sooner and especially this year and going forward using 100% bonus depreciation, which usually results in pretty significant deductions and thus tax savings. So super critical point.

[E]

Yeah. So we just talked about what costs do what they are in tax, etc. Now going to like a little bit more like physical. What are the best type of like cost. Like what are the best types of properties that you see get cost? Like what, like what's the best ROI you've seen there?

[D]

Yeah, great, great question. And before I hit that, I wanted to jump on one point just mentioned a second ago is the 100% bonus thing. I mean, I'm sure all the listeners know, but for sure, you know, we had 100% bonus come back in July 4th. I guess it starts January 19th of this year and just been a huge, a huge win for all real estate investors out there and it definitely, you know, increases the, the, the benefit of Kaseg. Right. We were looking at 40% this year and 20% next year and then zero in 2027. So huge win for us to get the, the 100% and the new bill. But yeah, in terms of properties that, that we look like to look at and what gives us the best roi? I think when you're looking at a purchased typically one question to ask yourself, does it have site improvements or not? Right. That's usually about half of the piece of the puzzle for most properties. You can usually, you know, if you take something commercially, for instance, like let's say an office building or something like that. Well, you, an office building might be, you know, 25% if it's like a building with the parking lot and grass and that kind of thing. But if you don't have the parking lot in the grass, you know, usually it's more in that 15% kind of range. So just kind of shows you the power of having a parking lot and site improvement. Same thing with the house. Right. If you're going to buy a house that's just a house that has no driveway, no lot or anything like that, then usually you can take a small haircut on top of that. But just in general, in terms of what types of properties we see that has the best. The best return there. I mean, you know, houses are usually 20 to 30%, you know, that kind of property. You know, obviously, if you get into, like, RV parks, mobile home parks, those kinds of things, you can really start seeing 60%, 70%, just really large benefits, sometimes higher than that, pretty large returns from cost segregation just because you're. Most of you. You have land improvements and things like that. So it's a lot easier to reclassify. Yeah, usually at the other end of the spectrum, we have warehouses. Warehouses are real low. You know, if you think about what we're doing in cost segregation as we're trying to take out things that are structural from the building and reclassify them. Well, if you have a warehouse, it's just a shell, right? It's just like an empty box. You have framing, roofing, siding, a slab, maybe, maybe a little bit electrical, but not a whole lot. And so when you have. When you have a warehouse, it's usually 3, 4, 5% or so, plus whatever we can get out of the land improvement. So, you know, if you got a warehouse with a parking lot, usually we can get 12, 14%, 15%, something like that. But that's usually on the lower end. So, yeah, I would say warehouses on the low end. And then, you know, houses are usually in the middle. Office buildings, medical office buildings, those are always a great purchase. Same thing. Usually 20, 30%, maybe, maybe low 30s. You know, you get like that dental office that has all those special plumbing connections for all the, you know, where you sit to get your teeth clean and all that kind of stuff. They have all kinds of vacuum piping and air tubing. And I could drone on forever, guys, about, about the inner, inner workings of GotSec.

[C]

But.

[D]

But yeah, I would say typically your houses, your medical office buildings, those kinds of things are pretty standard, 20 to 30%. And then. And then, you know, industrial buildings, again, usually 30, 40%, just because they have a lot of specialized equipment there. So. So that's kind of the range. Just kind of a couple of properties. We see a lot in this kind of space. So. Yeah.

[E]

So I actually want to touch on something you just said at the beginning. You talked about depreciating the grass. I thought we couldn't depreciate land. We talking about there, Edward? What's, what are we doing here?

[D]

Well, you definitely can depreciate land, but things that, you know, landscaping and land improvements, you can. So if we're adding sod or seeding the grass, things like this for landscaping purposes, we absolutely can and can depreciate. So that's a great point too. When you're thinking about your purchase is, you know, your land value, right? Because when you, a lot of people think that when you buy a property, you just take your purchase price and you apply your 25% if it's a house, and that's how you get your, your starting deduction. But really it's, you gotta, it's your purchase price minus the cost of land, and then you can apply that 25%. So if you're buying that beautiful house on the west coast, it's on the beach or something for $2 million, you gotta remember that you may be given 60%, 70% to land or something like that. So bear that in mind if you're looking at cost segregation as an option while you're price shopping.

[E]

So what I'm hearing is we should buy a golf course.

That's what I just heard. And also I get to play on it. So that sounds like a pretty sweet deal to me.

[D]

Yeah, golf courses are great. I love doing them too. I get to go, get to go to the links for the day, get.

[E]

To explore the site. Right now. Yeah, exploring the site. Yeah. Yeah. So actually kind of going into that, there's a kind of a perception that caustic runs like software reports. What's the difference between a software study and a in person study? Can you kind of break that down for us too?

[D]

Yeah, for sure. So I guess the software study or, you know, the kind of ones you can kind of do a lot on your own and so forth, I guess there's a lot of key differences there. Those were kind of, I guess, just a quick history. Those began, you know, 10, 15 years ago when cost segregation was kind of a different field. At that point, it was mostly for giant manufacturers, industrial facilities, giant commercial facilities. And so your starting price for cost seg usually was 10,000, 15,000, just a really big number. And so they were trying to find a way to kind of, you know, hey, how can we make cost more affordable to people? At that time, IRS scrutiny on cost segs was very low, just because no one really did them right, didn't really exist except if you had a big portfolio property. And so we ended up having these kind of providers come out with these little short studies. And the idea was, well, it's not a real cost seg study in the sense that the IRS audio Technique guide would, you know, give it A stamp of approval. However, you know it's going to work in the current environment. And I guess what's been happening lately is we've had, you know, a lot more interest from the RS just with the newest Audit Technique Guide that came out. So they've started to kind of look a little closer at these software studies. And so I guess I'm saying all this to say that the biggest difference is if you look at the Audit Technique Guide and what the IRS likes to see. And of course, the Audit Technique Guide is the guide the auditors kind of use to examine a cost segregation report. Yeah, they just don't have a lot of the boxes they like to check. You know, if you guys ever want to look, you can just Google Cost Segregation Audit Technique Guide. And there's this list of. I don't know if any of you will ever get this board, but there's this list of 13 things that qualities that the service likes to see in a quality Cost segregation report. Right. And so if you start going through that list, you'll see where. Because these kind of software studies were designed to be quick and easy, a lot of times they don't meet all those different definitions. Right. So it's not just like, are we on site? Are we not? And that's usually a big one. Right. If the IRS likes you to actually go on site, view the property, document the property, make sure things are still there, make sure, you know, it's all accurate information. Usually when you're on site, the good news is you can usually pick up a few extra percentage points in terms of your benefit. Right. Because we're now actually saying, hey, okay, now we understand that this is actually 20ft instead of 15ft, or you have 80% of flooring of, of vinyl versus 75 and so forth. So usually you get a little more in depth study, which, which helps you on your benefit. But you're also, from an audit defense standpoint, again, we've just seen lately a lot more interest on cost segregation from the service with the latest edition of the Audit Technique they launched this year. And so we think it's just super critical now in 2025 moving forward to think about, you know, in terms of doing a software study or not. Just making sure that your cost segregation study moving forward has a lot of those boxes checked as possible from the autotechnique. I just. So just things like most software studies don't usually have, like the methodology you're supposed to describe in the report and you're supposed to break out all these different factors. Like, then you have to divide things in cost segregation, not to just nerd into it, but usually you have like a cost and you apply like three or four or five different factors to it. And a lot of times when you're trying to do these quick and dirty software studies, you don't have the time to kind of go through and apply all these different layers to each individual cost. And then a lot of times in these, in these kind of reports, they don't necessarily disclose the methodology in the report because they don't necessarily want other people to know what's going on in the reports looking at you. Irs so, so as a result, they, you know, if you ever get to examine, you just have to be careful because you don't get a lot of those boxes checked like you want from the irs.

[C]

Out of Technique Guide makes a lot of sense.

[A]

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[C]

Ahead of the game.

[A]

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[E]

So, Edward, correct me if I'm wrong, but just quickly like kind of summarize all of that awesome information. It's kind of to say is that like, look, an in person study is probably going to hit all the boxes that the IRS can look for in the Audit Technique Guide and.

[D]

Right.

[E]

Well, IRS Technique Guide, it's not authoritative. It's not something that like you can rely on in court or even an IRS audit. But if you want to have less fights with the irs, you probably should do more of what they're asking you to do. Therefore, you'll have an easier time when you go to audit. Is that kind of safe to say? Edward?

[D]

Yeah, I think that's a great summary and that's kind of the end of the day, just. Yeah. Making sure that if you do what they're looking for, then you're not going to have as many problems.

[C]

Yeah, I just find it funny. Just this quick side comment there. It's like irs, they're auditing these guys, so and so forth. Can't help you in the Ventivan Audit, you can't use it in the Ventivil audit. Meanwhile, it's their guide. I just find it a little ironic, but it's just a side comment here. Getting back on track from a tax perspective, we often get a lot of questions about timing, Right. When should I do a cost segregation study? You know, there's a lot of myths out there. They have to do before the end of the year. I think we dispelled that in the past, but if we want to dive into that, we can. But when's the best time to perform a study in terms, is it before, after renovations? And like, is there any other timing issues that investors need to consider while making these?

[D]

Yeah. Great question. Thank you. I think typically the best time is. Is to. You usually want it done a month or so before you're going to file. Right. So that's kind of your timeframe for when you should do the study so you have time to do it. A lot of people think that some people think you have to do it before you close on the. On the property, and that's obviously not the case, or that you have to do it in the year, you know, you're placing it in service. Again, not the case.

[C]

Right.

[D]

We can go back and look at it from a later date. Like, if you bought a property from 2017, we could go back and do what we call look back study, where we. Where we look back and are able to capture the benefits of cost segregation from that. But yeah, but I would say typically, though, you know, if you bought a property this year, you would want to knock it out usually a month or so, have it completed a month or so before your taxes are due. Right. Just so it gives your CPA team enough time to actually, you know, tip that information from the cost seg and put it into your taxes in terms of, you know, we get this question all the time, when's the best time before or after renovations? And it just kind of depends, right. You know, and that's always the answer, right? It's kind of depends, but typically it's after renovations. Just to give you a real, you know, straight to the gut answer. But, you know, if you go into it a little more, if you buy property and then you're, you know, place in service, and then two years down the road you start to do renovations, then sometimes it makes sense to do it before and then kind of update the report later down the road when you do those renovations. And, you know, critically as well, when it comes to renovations, if you're doing the renovations Immediately. And this is usually the primary reason you don't want to, you don't want to wait till the renovations are done is you don't want to double count anything. Right. We want to make sure we're only counting everything in the building just one time. And so that's why usually the best scenario is to, you know, you're buying the property and then next day you're rolling out the renovations. Just wait till everything's set and done. So there's no chance we're counting your, you know, your specialty plumbing equipment twice if you're getting rid of some of it.

[C]

I have a quick follow up question. So what ends up happening to all the parts that are disposed during a renovation process? Right. I might tear off the roof during the renovation process. Is that eligible for a partial asset disposition in the year? Like so say for example, 20, 25, I buy a property, place in services, call it October, October's already passed, but let's assume I did that right? Then I rip off the roof on that property and replace it with a new roof, A, I guess, does it matter whether or not that was identified or not? And B, is that eligible for like a partial asset disposition?

[D]

Yeah. So if you're going to buy a property and you know, you shouldn't be able to do, typically you don't do pads, partial asset dispositions in the same year place in service. Right. So that's, that's pretty tradition. And there's kind of a gray area where you can be like, okay, well I bought this house, it's got a roof on it that's 10% of left of the life of the roof. So I'm going to squeeze out 10% of the roof and then do a pads on it, a partial asset disposition on it, and so get rid of a small percent of the roof. So if the roof was like $6,000, maybe you're only going to value at 600 and then do a partial asset disposition on that 600 of the roof. That's the remaining of the roof. So, you know, that's more of a gray area, you know, in terms of what you should do. Most people, they're just not going to do a partial asset disposition if it's the same year that they're placing it in service.

[C]

That's always been our view on it. It's just, you know, because it's a gray area, it's always interesting to get opinions. But yeah, that's, it's always been our view for the longest time that unfortunately if you dispose of an asset within the first year you place in service, it's not eligible for partial asset as disposition. So unfortunate. But it seems to be that case. So moving right along from this. Right. So bringing it down. Like, I don't know if I've ever asked somebody this question on the show before, but like, say I go and want to do cost segregation study. I find out whole CPA does them. I get on a call with Edward to talk about the cost segregation study. What happens? Like, what happens from there? What does a typical process look like if I'm the end user of a cost segregation study?

[D]

Yeah, yeah, it's a great question. So for cost segregation, usually you just love an intro call where we kind of go over the property and what your situation is. And, and once we kind of figure out that it's a good fit for you guys, for the client or the owner of the property, then we will give you an estimate and it kind of shows you, hey, this is how much the fee is and hey, this is what your expected tax benefits are. And then from there, if you decide to move forward, that typically you would sign an engagement letter. Once you get the engagement letter knocked out, then we'll set up a site visit where we, you know, send someone out to go look at the property to see what kind of condition it's in and document and all that kind of good stuff for us. And then we'll get all that information back from the site visit and we will kind of compile the report. And once we have all that information in the report compiled, you'll get this giant, you know, report, 50, 60, 70 pages long. Most of what's in there is just, you know, checking the boxes for the irs, making sure that, you know, if you ever get audited, it's not going to be an issue. But the important part is the front page has a summary on it and that's where you're going to find, you know, your five year and 15 year, and that's what your CPA is going to want to see. And that's where your results are. So usually the start to finish process is about a month, doesn't take very long. Then you have the report done and you'll know how much money you're going to save on your taxes.

[C]

Awesome. Awesome. Nate, do you have any follow up questions here?

[D]

No.

[E]

So it's not necessarily a follow up question to the timing piece, but one thing that everyone's asking a bajillion question about is the one big beautiful bill and what happens if I Purchase a property. If I close on a property before January 19, what happens to me? Am I stuck at 40% bonus appreciation? Do I get 100% bonus appreciation at C? It's the question of the hours, what it feels like, especially right now.

[C]

So.

[E]

Well, Edward, what are your thoughts there? And if there are workarounds around it, what are those workarounds?

[D]

So I guess the consideration there is for all the listeners, as they probably know, is, you know, the question is, do you have to use the old rules of 40% for 2025 bonus depreciation or are you going to be eligible for, for 100% bonus depreciation? So, yeah, it kind of comes down to a case by case. But you know, what we see a lot of times is if you're going to end up eligible, let's say you did a bunch of improvements and you started the improvements in 2024 and, and you weren't going to wrap them up till the middle of 2025. You know, let's just say it's $500,000 in improvements or something. Well, a lot of times what we can do is kind of go through with a fine tooth comb and carve out different things with what we call the component election, which allows us to say, hey, this, this cabinetry was actually installed in 2025 and nothing to do with 2024. It was solely a 2025 piece. There's also a 10% general safe harbor where if the costs were in 2024 less than 10% of the total construction, then you can count it as a 2025 build. So there's a few different workarounds when it comes to construction. And there's also, you know, we could really dive into what constitutes a binding contract in terms of trying to decide if, if your property or your purchased, you know, where you went under contract in December 25th or that's Christmas, you probably didn't do it that day. But if you December 26, you know, and then, and then you didn't close till January, whatever, and place it in service in March of 2025, you know, what's the situation there? And that situation, we would look at the contract to see if we can find out a way this is a binding contract or not. And if it can say it's not, then you'd be eligible for 100% bonus. So there's a lot of different workarounds. It's mostly on a case by case basis. Sometimes, you know, you do end up with the 40%, but it's always good to talk with your advisor or cost segregation professional and just kind of find out, you know, what you're going to be looking at in terms of. For tax planning purposes, typically, yeah, 100%.

[C]

So I know we talk about a lot today here about cost segregation. Obviously an essential tool in the tool belt for real estate investors. If you had to give one piece of advice to an investor who is considering cost seg, what would that piece of advice be?

[D]

Yeah, I mean, I think right now the big, I would say two. Two different pieces of advice is just if you're thinking about buying a property and you know you're going to do cost seg and you're trying to maximize your tax benefits, just, you know, thinking about that land improvement piece, you know, is it going to have side, is it not going to have side? And. And what that's going to do to your final tax benefit? And then, and then the other thing is just again, in terms of like the software study kind of element, just making sure that you understand kind of the new set of risks moving forward and where we are in that landscape, as always, do your own research on, you know, those kind of software studies, but just it seems to be a different landscape out there today than it used to be and something to be aware of, you know, moving forward.

[C]

All right, cool. Excellent advice.

[A]

There you have it, everybody.

[C]

We officially have cost segregation studies in house at hall cpa. Been looking forward to that for a very long time. So super excited that Edward has joined the team and looking forward to helping so many people save a lot of money with cost segregation studies. Having said that, we're currently only offering it to clients. If you're listening to this around the time this episode is released in December 2025. Um, so if you are a client of ours, this is something that we do have available. And if you're not a client of ours yet, I invite you to fill out the link in the description to this episode to book a discovery call. If you are looking for a new cpa, we'd love to help you figure out if we're a good fit and if so, outline a plan for you to help reduce taxes. So thanks again for tuning in and have a great rest of your day and we'll see you on the next week's episode of the Taxpayer REI podcast.

[A]

The TechSmart Real Estate Investors podcast is for general information purposes only and is not intended to provide and should not be relied upon for tax, legal or accounting advice. Information on the podcast may not constitute the most up to date legal or other information. No reader, user or listener of this podcast should act or refrain from acting on the basis of the information on this podcast without first seeking legal and tax advice from counsel in the relevant jurisdiction. Use of an access to this podcast or any of the links or resources contained or mentioned within the podcast show or show Notes do not create a relationship between the reader, user, or listener of the Podcast and the host, contributors, or guests. Any mention of third party vendors, products or services does not constitute an endorsement or recommendation. You should conduct your own due diligence before engaging any vendor. For more information, reference the show notes or description of this episode.

[B]

Thanks for listening to today's show. If you enjoyed the show, please find us on itunes and leave us a review. You can also email us at. Contact therealestatecpa.com with any feedback or topic suggestions. We are always taking on new clients and with the new tax laws in play, you really don't want to navigate this alone. Let us help you save money on taxes with your accounting and CFO needs to become a client. Navigate to our client [e-mail] and fill out a web form with as much detail about your situation as possible. Thanks so much for listening. Have a great rest of your week.