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- [Toby Mathis] Cost segregation.
Jeff was saying to me earlier, he goes,
man we're getting a lot of
cost segregation questions now.
And it seems like every
week we're getting one.
So here's how it works.
When you get a real estate,
whether it's commercial or residential,
if it's residential,
you get what they call,
it's classified as 1250 property,
from an accounting standpoint.
But you get straight line depreciation,
which means you take and
divide the improved value
over 27 1/2 years.
If it is commercial property,
you divide it out over 39 years.
What a cost segregation is,
it's you say, hey,
this whole building's not
going to last 39 years,
there's HVAC,
there's carpet, there's paint,
there's light fixtures,
there's electrical lines,
there's Cat 5.
There's all this other stuff in there.
Fans, air conditioners, all that stuff.
that may be seven year
property, five year property,
and what you're able to do there
is write it off much faster.
In the Tax Cuts and Jobs Act,
they gave us bonus depreciation.
Anything under 20 years,
you can write it off in year one.
And so, when you have a
single family residence
that you're renting,
and you're getting some
decent rents in it,
it may be worthwhile to
do a cost segregation
to take the,
to accelerate the depreciation.
To not pay tax on those rents.
Is it worth it?
It's, you know, there's
three rules to tax planning,
three rules to financial planning,
which is to calculate,
calculate, and calculate.
You would get your pencil out,
is it how much do they cost?
It varies.
You have a lot of people
thinking they're all 10 grand.
In the residential world,
you can get software now and do 'em for,
think around 1,000 bucks.
I don't know whether that would hold up,
there's lots of people
that think they will,
there's lots of people
that think they won't,
but you know,
if you hired an engineer
to build you the property,
and then all your other
properties are like it,
then there's a rent prop that,
I think it was a resolution.
Actually no, it was decision.
That said you could use
the same type of property,
that you could use the same methodology,
you will never know.
Have you seen those come up much Jeff?
- [Jeff Webb] I have not.
I know they're out there,
I know the court case you're talking about
that had the decision that
you could use it in certain circumstances.
One time I must tell you that probably
it is a bad idea to
get a cost segregation,
is if you are not planning on
holding some on the cost
and looking to sell it.
It's really a waste of time and money
to get this cost as a commercial property.
However, if your going to be holding it
as a rental property and you want to
be able to pick up some
cost now rather than later,
expenses now rather than later.
I think it could be
very valuable property.
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