Emerson Layne, LLC

Accelerated
Depreciation with
Total Protection

Layne uses IRS-approved cost segregation methods to maximize tax benefits available through real estate.

Cost Segregation Studies

Audit Support

Form 3115

Who is Cost Segregation For?

Through cost segregation, property owners can identify and separate personal property from real property assets, resulting in shortened, accelerated depreciation schedules. Examples of eligible assets include non-structural building components and exterior land improvements.

A quality cost segregation study aims to accomplish three goals:

Minimize current tax liability

Increase cash flow

Stand up against IRS scrutiny

Real Estate Investors

Property owners enjoy more working capital and increased cash flow through accelerated depreciation.

Tax Preparers

Accountants add exclusive value by incorporating cost segregation in their clients' tax strategies.

Developers

New construction and improvement projects provide specially-enhanced tax benefits.

Business Owners

Companies owning their buildings can significantly reduce operating expenses.

BRUCE

Arizona Partners Retail Investment Group

"Layne diligently examined property records, conducted detailed site inspections, and collaborated closely with our team to gather all relevant information. Their commitment to accuracy and compliance with regulatory guidelines ensured that we received well-documented and comprehensive reports.

[They] consistently demonstrated a proactive approach to communication and client service."

Why choose Layne?

Get an assessment in hours, not days

Every property is unique and deserves a personalized approach. We start each project with a free, same-day consultation so you can be sure it makes sense to move forward.

Plug straight into your taxes

Each study includes a detailed fixed asset report outlining accelerated depreciation opportunities and making tax reporting simple and efficient.

Lean on us for support

We analyze each asset group to boost the credibility of your tax filings. Our findings are thoroughly documented and keep your study within the IRS' guidelines.

More about our process

How it works

1. Qualifying Assessment

We want to make sure you can take full advantage of our study. That's why we start with a tailor-made benefit analysis for your property. This step gives us the chance to predict our findings and gives you the security to ensure a good fit before committing to anything.

Here's what we need to get started:

Property address
Purchase price & date
In-service date
Any relevant business-use or improvement details

2. Report Generation

This is the step that sets us apart from other cost segregation providers. Completing thousands of studies has taught us how to accurately accelerate as much depreciation as the IRS would find "reasonable." Asset justification is successful when the value of each asset group has been reconciled with the property's total replacement cost.

Your report will go through these stages before it's complete:

Document verification
Site visit
Cost engineering
Quality review
Form 3115 (if needed)

3. Implementation & Support

When we deliver the final report, you will also receive detailed instructions for how to use each part - including Form 3115 - when filing. Beyond that, we will stand with you in support of our findings, even when under IRS review.

Here's what you can expect long-term:

Live study review
Reporting instructions
Consultation with your CPA
IRS audit support
Change orders

Case Studies

View success stories from some of our most popular property types. Click the "Solutions" tab above to see how cost segregation applies to more than 20 different kinds of buildings.

Office - $957,000

Location: Gilbert, AZ

Building Size (sqft): 4,300

Year One Depreciation Increase: $315,300

Retail - $11,300,000

Location: Maplewood, MN

Building Size (sqft): 280,000

Year One Depreciation Increase: $5,670,000

Multifamily - $16,700,000

Location: Omaha, NE

Building Size (sqft): 155,000

Year One Depreciation Increase: $5,945,000

Industrial - $3,900,000

Location: Salt Lake City, UT

Building Size (sqft): 54,000

Year One Depreciation Increase: $795,300

Residential - $625,000

Location: Heber City, UT

Building Size (sqft): 2,468

Year One Depreciation Increase: $215,450

Storage - $3,100,000

Location: Jackson, MS

Number of Units: 489

Year One Depreciation Increase: $1,070,000

Get In Touch

Need Some Answers?

Take a look at some of our most common questions below. Or drop a new question in the form and we'll be happy to explain.

What should I look for in a cost segregation provider?

Short Answer: Look at what their clients are saying

Like in most industries, not every cost segregation provider executes their studies in the same way. It's important to understand what you're getting when signing an engagement.

Will they provide a completely revised depreciation schedule with asset classifications, depreciation methods, and conventions? Or will they give you a unit cost summary with amounts allocated to each building category?
Will they visit your property (virtually or in person) to take measurements? Or will they estimate their costs using generic property type models?
Do they include audit support in their offer? Or are you left to defend yourself under IRS scrutiny?
Can they accurately identify all of your short-life assets and classify them correctly? Or do they underestimate your property's value because they lack complete engineering knowledge?

When selecting a cost segregation firm, consider their experience and expertise in the field, including the number of studies they've completed and the variety of property types they've seen. Look at their background and gauge their credentials - find a firm that brings both deep familiarity with the US Tax Code and specific training in construction and engineering principles.

Check for testimonials or case studies from satisfied clients, and ensure they have a thorough understanding of IRS guidelines to minimize audit risks.

Will this trigger an IRS audit?

Short Answer: NO

The most common reaction to seeing how much tax savings is possible through cost segregation is to ask: “Is that even allowed?”

Naturally, most investors and accountants are skeptical of the audit risk posed by claiming large deductions, so the ﬁrst hesitation is to wonder if ﬁling a return with accelerated depreciation might trigger an IRS audit.

Taxpayers are often surprised to hear that the IRS supports cost segregation studies as long as they are completed within published guidelines. These guidelines are mentioned in the IRS Audit Technique Guide (ATG) for Cost Segregation, which details several elements for a quality study and report. The ATG covers court cases speciﬁc to cost segregation, industry-speciﬁc guidance, and compliances procedures.

While cost segregation itself does not trigger an IRS audit, it is crucial to work with a reputable provider who adheres to IRS guidelines and standards. A professionally conducted study with a detailed engineering report can provide solid documentation to support your depreciation deductions, reducing the risk of issues during an audit.

When does it make sense to do a study?

Short Answer: It always makes sense to get a benefit analysis done

Cost segregation improves the tax position of almost any real estate investor regardless of when a study is performed, but there are times when it can be leveraged more than others:

New transactions: accelerating depreciation immediately in the year of a new investment creates a dual-benefit effect - the new asset will provide another income stream at the same time that it will expand current cash flow reserves by lowering your tax bill.
Changes to your tax position: as your involvement in real estate investments increases over time, you will likely qualify for new statuses, such as “real estate professional”, that will change how depreciation affects tax on income from other sources.
Updates to the tax code: US legislators are very aware of the economic benefits of incentivizing growth in real estate markets. As such, new strategies and tools are introduced every year that can have a positive impact on your taxes. One example is bonus depreciation.

Consider a cost segregation study when you have a clear purpose for the tax savings it will generate. This might include offsetting a large tax bill, freeing up cash flow for other investments, or mitigating capital gains and recapture rates.

You should always explore cost segregation when there is an opportunity to take advantage of policies like bonus depreciation of the 481(a) Catch-Up Adjustment. There are many parts of the tax code that allow you to recover missed savings and strategize future savings for your real estate investments.

What types of properties does this work for?

Short Answer: Any property that generates income

Cost segregation is effective for a wide range of properties, including commercial buildings, industrial facilities, apartment complexes, retail centers, and even single-family rental properties. Essentially, any property that generates income and incurs depreciation can benefit from a cost segregation study.

Here's a generalized list of the property types we look at:

Office

Central business district
Office parks
Medical offices

Retail

Strip malls
Neighborhood centers
Shopping malls
Power centers
Out-parcel / standalone
Restaurants

Industrial

Flex warehouse
Heavy manufacturing
Light assembly
Bulk warehouse

Hospitality

Hotel
Motel
AirBnb

Residential

Single-family
Small multi-family
Garden-style apartments
Mid- and High-rise apartments
Assisted living facilities

Specialty

Car washes
Gas stations
Self-storage facilities
Mobile home parks
Theaters / rec. centers
Hospitals
Data centers

Mixed Use

Residential & retail
Office & retail

What's the difference between bonus depreciation and accelerated depreciation?

Short Answer: Bonus is a temporary provision

Accelerated depreciation is the result of allocating costs from the building to personal property and land improvements. Lets use an example:

Carpet flooring has a useful tax life of 5 years. If we can identify $50,000 of carpet in your property, your deduction will be roughly $10,000 a year for 5 years. Without cost segregation, that amount would instead be deducted over 30-40 years. Assigning smaller class lives to segregated assets causes you to claim more depreciation over a shorter period, creating this "accelerated effect".

Bonus depreciation is a temporary provision that enhances the effects of cost segregation by allowing property owners to deduct a larger portion of qualifying assets in the year that they are placed in service.

Using the same example above, carpet (being classified as tangible personal property) qualifies for the bonus allowance. If that carpet was placed in service in the year 2020, the property owner would be allowed to claim 100% of its value as a depreciation expense in the first year.

As mentioned before, the bonus rate allocation is always changing. This table shows the percentage given to short-life assets based on the year they are placed in service (not the year the study is done).

DATE PLACED IN SERVICE	QUALIFIED BONUS %
Sept 28, 2017 - Dec 31, 2022	100%
2023	80%
2024	60%
2025	40%
2026	20%

What if I bought my property a few years ago?

Short Answer: Catch-up depreciation

If you purchased your property before the current tax year, you can still reap the tax savings from a cost segregation study. The IRS allows you to perform a depreciation adjustment that can be taken in the current tax year on what's called Form 3115 (Application for Change in Accounting Method).

We subtract your prior depreciation claimed from what you would have been allowed to claim so far had you done a cost segregation study in the first year. The difference is "caught up" as an IRC Sec 481(a) income adjustment.

No amended tax returns.
No loss of tax savings.
Form 3115 provided by us, with no extra charge.

EXAMPLE

Let's say you buy an office condo in June 2020 for $1,000,000, but you didn't get a study done until 2024. You would have claimed:

$14,000 of depreciation in 2020,
$26,000 of depreciation in 2021,
$26,000 of depreciation in 2022, and
$26,000 of depreciation in 2023

Totaling $92,000 claimed over the first 4 years.

After doing a cost segregation study, we find $270,000 of short-life assets to reclassify for accelerated depreciation. If the study had been done in 2020, you would have claimed:

$50,000 of depreciation in 2020,
$85,000 of depreciation in 2021,
$63,000 of depreciation in 2022, and
$49,000 of depreciation in 2023

Totaling $247,000 claimed over the first 4 years.

The math is simple. You claimed $92,000, but you could have claimed $247,000, so the difference ($155,000) goes on Form 3115 to be filed as an immediate write-off on your 2024 taxes.

What about depreciation recapture?