DIY Cost Segregation or Site Visit: What is Best for Me?
For cost segregation to be truly effective, you need a solid income stream that can be shielded via accelerated depreciation. Say you own a business with $1 million in income. You purchase a $4 million dollar office with an opportunity to use depreciation on many short-life factors. In this scenario, if you use our full services, you will save 40% in depreciation in the first year, while you will save 36% without a site visit. Using a marginal tax rate of 30%, this means you save $480,000 with the full service, while DIY will net you $432,000. The gains in savings easily wash out the cost of an on-site inspection.
Cost segregation is a project not to be taken lightly. The on-site visit by an inspector is often the largest cost in the process. In most cases, the price is worth it, as it will bring in more savings than it costs. In others, it is hard to justify the upfront costs. This is especially true if you have a lean budget.
In the second scenario, your business is much more modest. Your income is around $50,000 a year, though there is huge potential to grow the business. You buy a facility worth $5 million, which also has a great deal of short-life assets attached, around 45% of the purchase price. Using O’Connor’s full suite of services gets you a depreciation savings of 45%, while DIY gets 41%. This translates into $2.25 million with an on-site visit and $2.05 million for DIY. While it seems that using an on-site visit is the best idea, keep in mind that the income is only $50,000, and it will take a much longer time to use the depreciation. In this scenario, saving $2,500 on a site visit may make more sense from a financial standpoint.
We have a staff of experts in cost segregation that can help you determine which option is better suited for your business. It is our suggestion that you consider both options and pick the one that best works for your long-term goals.