# SMF Cost Segregation Advisors - Complete Guide > SMF Cost Segregation Advisors is a specialized firm providing IRS-compliant cost segregation studies for small multifamily apartments (5-200 units) and residential rental properties across the United States. We help real estate investors maximize tax savings through accelerated depreciation strategies. ## About Cost Segregation Cost segregation is a strategic tax planning tool that allows commercial and residential property owners to accelerate depreciation deductions by reclassifying building components into shorter recovery periods. ### How It Works Buildings are typically depreciated over 27.5 years (residential) or 39 years (commercial). However, many building components actually qualify for much shorter depreciation periods: - **5-year property**: Carpeting, appliances, decorative fixtures, specialty lighting, certain electrical/plumbing for specific equipment - **7-year property**: Office furniture, certain machinery, specialty fixtures - **15-year property**: Land improvements including parking lots, sidewalks, landscaping, fencing, outdoor lighting, signage A cost segregation study identifies and reclassifies these components, moving 20-40% of a building's depreciable basis from 27.5-year to accelerated recovery periods. ### Bonus Depreciation 2025 The One Big Beautiful Bill Act (OBBBA) restored 100% bonus depreciation for qualified property placed in service starting January 19, 2025. This means: - All 5-year, 7-year, and 15-year property can be 100% expensed in year one - Combined with cost segregation, investors can deduct 20-40% of their building basis immediately - Prior years followed a phase-out schedule (80% in 2023, 60% in 2024) ## Services Offered ### Residential Cost Segregation Studies **Single Family Rentals & Small Rentals** - Starting at $1,500 per study - Includes virtual site inspection - IRS-compliant asset classification - CPA-ready depreciation report **Multifamily Properties (5-200 units)** - Starting at $2,500 per study - Comprehensive engineering analysis - Detailed component breakdown - Full audit-ready documentation **Portfolio & Multi-Property Studies** - Custom pricing with volume discounts - Coordinated analysis across properties - Unified reporting for tax preparation ### What's Included Every study includes: 1. Virtual site inspection conducted by experienced cost segregation specialist 2. Comprehensive asset classification aligned with IRS Rev. Proc. 87-56 3. Detailed depreciation schedule with itemized building components 4. 40-50 page PDF report with CPA-ready documentation ### Engineering Approach Our four-step process ensures accurate, compliant, and defensible studies: 1. **Virtual Inspection**: Assess property structure, finishes, site work, and mechanical systems via video call 2. **Asset Classification**: Categorize components per IRS Rev. Proc. 87-56 using replacement cost estimates 3. **Depreciation Report**: Create detailed ledger with recovery periods, values, photos, and supporting documentation 4. **Audit-Ready Review**: Multi-level review ensures compliance with IRS Audit Technique Guide standards ## Who Qualifies ### Eligible Property Types - Small multifamily buildings (5-200 units) - Single family rentals - 2-4 unit plexes (duplexes, triplexes, fourplexes) - Short-term rentals and Airbnbs - Recently purchased, constructed, or renovated properties ### Requirements - Property cost basis of at least $200,000 - Property placed in service after 1986 - Remaining depreciable basis available - Works for both new acquisitions and properties owned for years ### Look-Back Studies Property owners don't need to have purchased in the current tax year. Look-back studies allow: - Catch-up on all missed depreciation via Section 481(a) adjustment - File Form 3115 with current tax return - No need to amend previous returns - Properties placed in service as far back as 1987 qualify ## Case Studies ### Dallas Multifamily - $1.35M+ Tax Savings - 200-unit luxury apartment complex - $12.5M+ purchase price (2018, renovated 2023) - Reclassified: 26.5% to 5-year, 1% to 7-year, 9% to 15-year ### Chicago Garden Apartments - $250K+ Tax Savings - 8-unit garden-style building - $3.1M+ purchase price (1924, renovated 2022) - Reclassified: 21.5% to 5-year, 0.5% to 7-year, 3.5% to 15-year ### Louisville Single Family - $130K+ Tax Savings - Luxury single family rental - $1.6M+ purchase price (2019, renovated 2024) - Reclassified: 23.5% to 5-year, 1% to 7-year, 7.5% to 15-year ## Frequently Asked Questions ### How much tax savings can I typically expect? Cost segregation typically reclassifies 20-40% of a property's depreciable basis into shorter recovery periods. Actual savings depend on property type, purchase price, construction details, and your tax bracket. ### Do I need Real Estate Professional (REP) status? Not necessarily. While REP status allows offsetting W-2 income, non-REPs can still use passive losses to offset other passive income, carry forward unused losses, or offset gains upon sale. Short-term rental operators may qualify without REP status. ### Can I do a look-back study on an older property? Yes. Look-back studies work for properties placed in service as far back as 1987. The IRS allows catch-up via Form 3115 without amending prior returns. ### What's the deadline for completing a study? The deadline is tied to your tax filing date, not December 31st. Individual filers have until April 15th (October 15th with extension). Partnerships/S-Corps have until March 15th (September 15th with extension). ### Do renovations qualify? Yes. Major renovations and capital improvements are excellent candidates. Each improvement has its own placed-in-service date. Partial Asset Disposition (PAD) can also write off replaced components. ### What's the typical timeline? - Rapid Report (smaller assets): 5-10 business days - Fully Engineered Study (complex multifamily): 15-20 business days - Rush service available for tight deadlines ### Section 179 vs Cost Segregation? They're complementary tools. Section 179 expenses certain building systems (roofs, HVAC) but has income limitations. Cost Segregation targets non-structural assets (carpeting, parking lots) with no spending cap and can create Net Operating Losses. ## Contact Information - **Website**: https://www.smfcostseg.com - **Email**: info@SMFcostseg.com - **Free Proposal**: Available within 24 hours of submitting property information ## Important Disclaimers SMF Cost Segregation Advisors does not provide tax, legal, or accounting advice. Our services consist solely of preparing cost segregation studies and related engineering-based analyses. All tax decisions should be made in consultation with your qualified CPA, tax advisor, or attorney. Tax savings estimates are for illustrative purposes; actual results vary based on individual tax situations. ## Related Resources - [IRS Cost Segregation Audit Techniques Guide](https://www.irs.gov/businesses/cost-segregation-audit-techniques-guide-table-of-contents) - [IRS Publication 946: How To Depreciate Property](https://www.irs.gov/publications/p946) - [26 U.S. Code ยง 168(e): Property Classifications](https://www.law.cornell.edu/uscode/text/26/168)