Why Basis

Most cost segregation firms sell one kind of study, so that is the one they tell you to buy. We offer two engineered tiers, which lets us put them side by side and tell you which one your building needs. For plenty of buildings, that is the budget one.

The problem with asking a firm which study you need

A national engineering firm will tell you that you need a full engineered study, because that is what it produces. A software provider will tell you its automated study is sufficient, because that is what it produces. Both answers are sincere and both are structurally compromised. Neither firm can recommend the other's product without losing the sale.

We sell both tiers, and the guarantee's floor on first-year deductions applies to either one. So we recommend whichever fits your building.

Basis compared honestly

The bottom row is the one that matters. If you own a $50 million industrial plant, hire a large national engineering firm, and we will tell you that on the call rather than after you have paid us. We are built for owners between roughly $300,000 and $10 million of basis, which is most of the market and the part of it that gets the worst advice.

The four things we will put in writing

1. Two tiers, and which building gets which

Our engineering team builds both tiers, and each comes with a 70-plus page report aligned to the IRS Audit Techniques Guide, with audit support included. The budget tier is a remote study built from your photos and documents. Nobody visits the property. It fits simpler, more standardized buildings, and the fee is lower. The full tier adds individualized engineering review for larger and more complex properties. A single-family rental usually lands in the budget tier. A surgery center never does. The property decides.

2. A minimum in first-year deductions, or you do not pay

Our study identifies at least 20 times its fee in first-year deductions on a commercial property, or at least 30 times its fee on a short-term rental, or it is free. It is a ratio rather than a dollar figure, so it holds regardless of what your particular study costs. We are not aware of another firm in this category that will put a floor on first-year deductions in writing.

3. Your number before you pay a dollar

You get a property-specific preliminary benefit estimate first, modeled from real parcel data on your building rather than from a slider on a calculator. Then you decide. Most firms in this category make you sit through a sales call before they will say a number, so here are ours.

Need it fast? Rush delivery is within one business day after you have signed, paid and sent your documents, for $995 on top of the study fee above. Residential and short-term rental only. How the rush works »

How to read the depreciation column: these are estimated first-year deductions, not cash. How a deduction applies to you depends on your own return. Deductions are also the unit our guarantee is written in, which is why we quote them here rather than a savings number we would be guessing at. The ranges run 12% to 20% of a property’s value once land is taken out, which is why they are wide. A restaurant or a heavily fitted-out building lands near the top, a plain warehouse near the bottom. Your actual number comes from the estimate we run on your building before you pay anything, and your CPA confirms it. Not tax advice.

These govern every one of those numbers, and both are in your favor.

The guarantee is also a price ceiling. Our fee can never exceed one twentieth of your estimated first-year deductions on a commercial property, or one thirtieth on a short-term rental, because that is what the guarantee promises. When a building reclassifies at the low end, and medical offices and plain warehouses often do, the quote comes down or we decline the engagement. We would rather lose the fee than publish a floor we cannot hold. The same rule sets where those tables start. Below roughly $300,000 on a rental, or $575,000 on a commercial building, our own guarantee often caps the fee below the table price, so we quote those one at a time or tell you it is not worth doing.

Why the tables read on what you paid. Only the building depreciates, never the land, so the figure that actually drives your deduction is the purchase price with land taken out. We price on the purchase price anyway, because you know that number today and nobody knows the split until the study runs. The depreciation ranges above already carry a land allowance of 30%, which is heavier than most properties outside dense urban infill. If your land runs above that, the published price would breach our own guarantee, so we quote the property individually instead.

Duplexes, triplexes, fourplexes and ADUs. A building with two to four units is priced from the same residential table plus $500 on the budget tier. An ADU rented on its own is priced on the ADU alone, meaning what it cost to build or convert, or its share of the purchase price by square footage, so most ADU studies fall below where the table starts and are quoted one at a time. When both the house and the ADU are rented, the property is priced as a two-unit building on what you paid, and the conversion cost goes into the study at no extra fee.

The fee follows the finding, not the price of the building. Two commercial buildings worth the same money can support fees that differ by more than double, because one holds far more short-life property than the other. That is why you get your estimate before you get your quote.

4. We will tell you no

A deduction helps this year only if you can use the loss this year. We screen that before we quote, not after. If the test for using the loss this year is not met, we will say so and you will not get a proposal from us. The firms that never disqualify anyone are not being generous. They are being paid either way.

First, can you actually use the deduction this year?

This is the question most firms skip, and skipping it is how owners end up paying for a study before they know whether they can use the deduction in the current year. A cost segregation study creates a large paper loss. Whether that loss offsets your other income this year depends on you, not on your building.

You can generally use it against active income now if you materially participate in a short-term rental (average guest stay of seven days or less, and you run it yourself rather than handing it to a property manager), if you hold Real Estate Professional status, or if you have passive income to offset. If you own a long-term rental, use a property manager, and have no passive income, the loss is still real but it suspends and releases later, usually on sale. That is a deferral.

We screen for this before we quote. If the test for using the loss this year is not met, we will say so before you pay anything.

Frequently asked questions

What am I actually paying for?

Three things. The study itself. The recommendation: which tier your building actually needs, and whether you should run a study at all this year. And the guarantee: we put a minimum in first-year deductions in writing and we absorb the risk if our estimate was wrong. A firm that only sells one kind of study cannot offer you the second and has little reason to offer the third.

What is the difference between the budget and full tiers?

The budget tier is a remote engineering study built from your photos and documents, with no site visit, made for simpler, more standardized properties. The full tier adds individualized engineering review for larger and more complex ones, and it costs more. Either one comes with a 70-plus page report aligned to the IRS Audit Techniques Guide, and the guarantee and audit support apply to both.

Who signs the engineered study?

Our engineering team signs it and defends it if the IRS examines it, which means they answer your tax professional's written technical questions about it at no charge. Your own tax professional represents you before the IRS. Basis is your single point of contact throughout.

What exactly does the guarantee cover?

It is a ratio, not a dollar amount, so it does not depend on what your study costs. Our study identifies at least 20 times its fee in first-year deductions on a commercial property, or at least 30 times its fee on a short-term rental, or the study is free. Deductions, not cash. If the number we modeled before you paid does not hold up, that is our problem rather than yours.

Why do you turn people away?

Because a deduction helps this year only if you can actually use the loss. If you own a long-term rental, use a property manager, and have no passive income and no Real Estate Professional status, the deduction suspends and releases later, usually on sale. Selling you a study in that situation would be an easy sale and a bad one.

Sources

» Internal Revenue Code Section 168(k), additional first-year depreciation
» IRS Cost Segregation Audit Techniques Guide (Publication 5653)
» IRS Publication 946, How To Depreciate Property
» Treasury Regulation §1.168(i)-8
» IRS Form 3115, Application for Change in Accounting Method
» Hospital Corporation of America v. Commissioner, 109 T.C. 21 (1997)
» Submarket rent, capitalization rate, and vacancy figures compiled by the Basis property data engine from CBRE, Cushman & Wakefield, Newmark, and Colliers market reports. See Sources & Citations.