Why Cost Segregation Firms Ask for Before-and-After Photos

When you bring a cost segregation company on board to evaluate your property, one of the initial steps in the cost segregation process is gathering information about it. They might request photos, along with closing statements and depreciation schedules.

And it’s not just the new photos they’re after. They often want to see older interior photos as well.

At first, this might seem a bit excessive, especially if the property has already undergone renovations. However, those images are crucial for ensuring the accuracy of your study and making it defensible in the eyes of the IRS.

The Real Reason: Different Depreciation Timelines

When you buy a property one year and renovate it in another year, you're creating two separate tax events. Each one has its own depreciation schedule, and mixing them up can cost you thousands in lost deductions... or worse, trigger an IRS audit.

4 Reasons Before-and-After Photos Help Your Cost Seg Study:

1. Separate Original Assets from New Improvements

Before-and-after photos show exactly what existed when you purchased the property versus what you added during renovations. That new lighting, flooring, or HVAC system? It qualifies for its own accelerated depreciation, but only if it can be clearly identified as a post-purchase improvement.

2. Prevent Double Counting

Without clear documentation, it's easy to accidentally claim the same asset twice, once for the original property and again for the replacement. Photos eliminate this risk by showing what was demolished or replaced, keeping your study IRS-compliant.

3. Build Bulletproof Audit Defense

If the IRS ever takes a closer look at your study, having visual evidence is like striking gold. Engineers often include these photos in their technical exhibits to clearly show what was there at the time of purchase and how things have changed since then. When you pair these images with invoices and construction records, your documentation becomes nearly bulletproof.

4. Improve Engineering Accuracy

Cost segregation reports aren't just spreadsheets, they're engineering documents. Before-and-after photos help create precise visual exhibits that support every classification decision, ensuring no square foot of improvement gets missed.

Gather Documentation For Your Cost Seg Study

Every piece of real estate has its own unique characteristics, which is why it's so important to collaborate closely with your cost segregation provider. The more detailed and accurate information you can share from the start, the easier the process will be, which means better outcomes and more savings.

What to provide your cost segregation company:

• Closing or Settlement Documentation

• Depreciation Schedule

• Photos or appraisal from when the property was purchased

• Photos after improvements are complete

• Any construction documentation or invoices you have

Your provider may ask for additional documents that are specific to your property. Make sure to stay responsive to their requests; this is key to ensuring you capture every dollar of bonus depreciation you're entitled to while remaining fully prepared for any audits.

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