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Ext. PublicationTiming Your Cost Segregation Study for 2025 | Podcast
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Location Cubed
Join Alex Hill and Ralph Ferrales as they discuss cost segregation studies for 2025. Learn more about how to use a cost segregation study for properties placed in service in 2025, as well as for older properties, without amending prior returns, by using Form 3115.
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Detailed Description of Location Cubed: Timing Your Cost Segregation Study for 2025
00:00:00
Alex: Hey, everyone. I’m Alex Hill, and this is Location Cubed, Weaver’s Beyond the Numbers real estate podcast.
00:00:07
Alex: And today, I’m with Ralph Ferrales, our cost seg professional. Ralph, we’re getting this question a lot right now: Is it still possible to do a cost seg study for 2025? And why does it matter? Who should be paying attention?
We’d love to hear from you.
00:00:23
Ralph: Hey, Alex. Thanks for having me on, and it’s a question we get during this time, all the time, right? Do we still have enough time to do a cost segregation?
The answer is yes, right?
00:00:34
Ralph: So, if you placed a building in service, or self-constructed a building in 2025, really the key date to look at is your filing date, right? So, whether it’s April or even with extensions into October or later in the fall, that’s the date that we should be looking at.
So, absolutely, if you placed a building in service in 2025, it’s not too late.
00:00:52
Ralph: It’s getting to the point where it might get too late, right? Like, my team right now is really deep in the weeds on doing studies.
And, you know, obviously, we only have a few weeks left in busy season, so you could still give us a call, and we can still do a cost segregation for 2025.
00:01:09
Ralph: Now as to the latter part of your question, who benefits? Really, anyone who either acquires a property or self-constructs a property can do cost segregation, right?
00:01:22
Ralph: And obviously, as long as they’re not in losses and they can use those deductions, we can do a cost segregation, which essentially takes a look at the real property component of that building, and it carves out the shorter-lived assets.
00:01:36
Ralph: So those could be finishes. Those could be decorative lighting. Anything that’s not there for the operation and maintenance of the building, the IRS allows those assets to be depreciated over a much shorter period of time than 27 ½ or 39 years, which would typically be the real property recovery.
00:01:53
Alex: Awesome. And one more question. Does it matter when you buy the property to do a cost seg study?
00:01:59
Ralph: No. It doesn’t matter when. Again, if you bought it in 2025, no matter when in 2025 you bought it and placed it in service, you can do a cost segregation.
00:02:08
Ralph: Now a key date there is January 19, 2025. So let me just point that out quickly.
That’s when 100% bonus depreciation basically came into effect because of the One Big Beautiful Bill Act.
00:02:19
Ralph: So, if it was acquired and placed in service after January 19, 2025, you get 100% bonus on the basis that we can recover over a shorter life.
If you acquired or placed in service in the earlier part of the year, earlier than January 19, you may be subject to less bonus depreciation.
00:02:39
Ralph: But the one thing I do want to note too, a lot of clients do ask that question, does it matter when you do the cost seg? Sometimes it does matter when you do it, even though you’re not going to really effectuate it until you file the return.
00:02:53
Ralph: The earlier in the year you do it, you can take advantage of the fact that you do the cost segregation, you’re getting those deductions in your estimated tax payments. So, it allows you to decrease your estimated tax payments, which, again, is a time value of money savings.
So, it always pays to do the cost segregation as soon as you can do it when you purchase that property.
00:03:14
Alex: Yeah. That’s great to hear, especially for people who think they missed the window.
So, for our clients, friends, we’re happy to make the connection to Ralph before it’s too late, and, Ralph, thanks for joining us today.
00:03:26
Ralph: One more thing, Alex, just to remind our clients and those watching. It doesn’t have to be a current year addition for us to do a cost segregation.
We can do a cost segregation on property that was acquired in prior years as well.
00:03:41
Ralph: The IRS makes this relatively straightforward. We don’t have to amend returns. We can go ahead and file what’s called a method change, change of accounting method.
00:03:50
Ralph: We file what’s called a Form 3115 with your current year return.
What that allows taxpayers to do is catch up the missed deductions that they would have taken had they done a cost seg, right, two or three years ago or whenever they bought that property.
00:04:05
Ralph: You can catch up those deductions in the current year return. So, it’s relatively painless.
00:04:09
Ralph: So, again, we can do a cost segregation on a current year addition, in this case, 2025. Or if you purchased or constructed a building in prior years, we can help you there as well.
00:04:19
Alex: Great to hear. Thanks again, Ralph.
00:04:21
Ralph: Thanks, Alex.
