A Perfect Match: Choosing Referral Partners That Add Value

A Perfect Match: Choosing Referral Partners That Add Value  

Today’s CPAs serve as true partners and trusted advisors to clients, becoming intimately familiar with each client’s growth, plans, and struggles.  This means that when the need may arise to augment in-house services, most CPAs won’t partner with just anyone. Many CPAs are wary of recommending consulting firms, concerned that an unsuccessful engagement might damage the client relationship. No matter what type of referral partner is being considered – financial services firm, insurance firm, 1031 exchange firm, cost segregation provider, or any other – the CPA firm must do their research and carefully select someone they trust to take care of their clients.  

I’m not really comfortable with the idea of a referral partner. Why can’t we keep things in-house? 

Depending on the nature of your firm, maybe you can. However, as the tax code gets deeper and more complex, it’s becoming difficult for all but the largest firms to have every necessary expert just down the hall. For example, cost segregation is a specialty service requiring knowledge of construction methods, engineering, and the Internal Revenue Code for fixed assets including applicable Tax Court cases and Revenue Rulings.  The concept of accelerated depreciation may seem simple, but depreciation law and building technologies are anything but. A detailed, defensible cost segregation study can only be performed by an experienced engineer, and most CPA firms don’t have the volume to justify keeping those niche resources in-house. Partnering with a qualified cost-segregation firm like Capstan allows a CPA firm to provide a value-added service without keeping engineers on staff. 

What will the right referral partner (RP) do for my firm?  

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Bruce Johnson - The Importance Of A Cost Segregation Study

What is Cost Segregation?

Cost segregation is a tax planning strategy that can help real estate owners and tenants to accelerate depreciation deductions. Although standard depreciation occurs over a lengthy 39-year period, many assets within a structure–from plumbing and electrical fixtures to flooring–are not designed to last that long.

The ability to break out such assets for a five-year, seven-year, or 15-year recovery period helps accelerate depreciation, defer taxes, and improve cash flow.

Invest In An Engineering-Driven Cost Segregation Study

An engineering-driven cost segregation study can be useful at any point in the real estate cycle. Whether a property has been newly constructed, recently acquired, or undergone renovations or tenant improvements, a cost segregation study is likely to be a valuable depreciation tool. In certain cases, a look-back study can be appropriate.

Bottom line: If you own your building or if you’ve made improvements (as an owner OR a tenant), you may benefit from a cost segregation study.

Benefits Of Leveraging Cost Segregation

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Tax Savings In A Multi-Family Market With Cost Segregation

The multifamily market remains very strong as an investment.  Along with providing the opportunity to earn rental income, multifamily projects offer a number of tax benefits to the thoughtful investor.  In fact, we’re finding that investors view the tax savings associated with cost segregation as a major reason to consider the multifamily sector.  Since 2018, one of the major drivers has been 100% bonus depreciation for both new and used assets having a shorter than 20-year MACRS class depreciation life.  Prior to the TCJA, you could only take bonus on new construction and renovation assets.  Getting bonus on acquisitions has had a huge impact on commercial real estate, especially the multi-family sector.        

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Cost Segregation Is A Tax Planning Strategy

What Is Cost Segregation?

Cost segregation is a tax planning strategy that can help real estate owners and tenants to accelerate depreciation deductions. Although standard depreciation occurs over a lengthy 39-year period, many assets within a structure–from plumbing and electrical fixtures to flooring–are not designed to last that long.

The ability to break out such assets for a five-year, seven-year, or 15-year recovery period helps accelerate depreciation, defer taxes, and improve cash flow.

Why Are Cost Segregation Studies Useful?

An engineering-driven cost segregation study can be useful at any point in the real estate cycle. Whether a property has been newly constructed, recently acquired, or undergone renovations or tenant improvements, a cost segregation study is likely to be a valuable depreciation tool. In certain cases, a look-back study can be appropriate.

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