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What is Cost Segregation ?

Cost Segregation may be a commonly used strategic tax planning tool that permits companies and individuals who have constructed, purchased, expanded or remodeled any quite land to extend cash flow by accelerating depreciation deductions and deferring federal and state income taxes.
It is a useful tax strategy that allows real estate investors who have acquired, built, or purchased land or real property to reduce their taxable income by having a cost segregation study or segregation analysis completed on the property.

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How the Concept was born

Whenever a property is purchased, it not only includes a building structure, also it includes all of its interior and exterior components. On average, 20% to 40% of these components fall under tax categories which will be written off much quicker than the building structure. A Cost Segregation study dissects the development cost or price of the property that might rather be depreciated over 27 ½ or 39 years. The primary goal of a price Segregation study is to spot all property-related costs which will be depreciated over 5, 7 and 15 years. For example, certain electrical outlets that are dedicated to equipment like appliances or computers should be depreciated over 5 years.

Cost Segregation Screen

Why Cost Segregation ?

Cost segregation studies offer significant tax savings, especially for businesses, such as manufacturers, with specialized facilities. Consider this example:

Wolverine Widgets, a heavy manufacturing company, acquires an existing plant for $10 million on July 1, 2013. If the company were to allocate the entire purchase price to the building, its depreciation deductions would be roughly $256,000 per year ($177,000 in year 1, under IRS tables). Wolverine obtains a cost segregation study, which concludes that 35 percent of the purchase price is properly allocable to 39-year property, 15 percent to 15-year property, 45 percent to seven-year property, and five percent to five-year property.

In this example, a cost segregation study generated an additional $703,000 in depreciation deductions in the first year alone.

What we Solved Here

Cost Segregation aims to provide users to cut off their tax pay amount of a Real Estate. It helps in dissecting the development cost and price of the property that might be depricated over a period of time. The tax savings generated by depreciating more assets as personal property usually more than make up the extra cost incurred in conducting the study.

Cost Segregation Graph

The Key Challenges

High Accuracy Calculation

As Cost Segregation is method for saving taxes on construction, segstream has stake of giving accurate analysis to save clients' hard earned money.

Segsteam as an Analytic tool for Cost Segregation Engineer

As purpose of segtream is to give clear insight of construction related data, we have faced challenge of giving multiple presentation of same data with the constraint of developing reusable and easily maintainable code to make analysis easier, and to provide user with analysis tools in UI with the extensive use of Javascript and Jquery for minimising the communication between the client and server.

Optimizing High Computational Latency

Sometimes in Cost Segregation analysis, we have to deal with the computation related to large number of records which causes high latency between server request and response. For optimising this, we have opted for the use of non traditional NON BLOCKING CODE with the use of messaging queues(Redis), worker management(celery) and webhooks(django-channels).

Developing DSL(Domain specific language)

There's a problem faced by cost segregation engineers, of doing repetitive work while setting up similar property job for analysis every time. For the sake of example, say, a hospital building with "x" number of floors have "n" number of item A and "m" number of item B, similarly, hospital building with 2 "x" number of foors will have 2 "n" number of item A and 2 * "m" number of item B. Now these rules might not be such simple.

Cost Segregation Screen

Our Technology Stack

We work with latest and best, We started with filling the web application base with an updated and latest technology bucket to ensure that the concurrency time was high. A maintain a constant look on how the users are interacting with the product, with maintaining the changes that we are putting in.

Cost Segregation - Technology Stack

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