Tom Brodie - CSSI Cost Segregation

On Using Bonus Depreciation on Buildings of All Sizes: "So people that own smaller buildings like that, they can actually get a reasonable return on this as well."

Discover Hidden Savings in Commercial Real Estate

In this week’s episode, we dive into the world of cost segregation and tax strategy with Tom Brodie—better known as “The Found Money Guy.” If you own commercial property or are considering buying, this interview is packed with actionable insights you can’t afford to miss.

What is Cost Segregation?

Learn how breaking down your building’s components (like carpeting, parking lots, internal walls, and more) can allow you to depreciate assets faster—and potentially save tens or even hundreds of thousands on taxes. (01:11)

Why Now? 100% Bonus Depreciation Is Back

Understand how the latest tax law changes made 100% bonus depreciation permanent—unlocking huge deductions in the first year for non-structural assets. (08:08)

Do You Qualify?

Any commercial building, whether a $200,000 office condo or a $10 million high-rise, can benefit from a cost seg study. Find out what kinds of properties see the best returns. (12:22)

Tax Credits vs. Deductions—What’s the Difference?

Wondering if an R&D tax credit or a deduction is better? Get a clear explanation and why tax credits may have more impact on your tax bill. (00:00, 24:19)

Bonus—Green Zip Drywall Tape

Discover innovative building materials that accelerate depreciation and offer green construction incentives. (25:19)

Enjoy!

Visit Tom at: https://thefoundmoneyguy.com and https://cssistudy.com

Sponsors:

Calls On Call Extraordinary Answering Service, phone answering for small businesses: https://callsoncall.com

Some videos have been recorded with Riverside: https://www.riverside.fm/?utm_campaign=campaign_5&utm_medium=affiliate&utm_source=rewardful&via=james-kademan

 

Podcast Overview:

00:00 Helping building owners save on taxes

05:52 Accelerated depreciation for buildings

08:08 Understanding Bonus Depreciation Rules

12:22 Offering free estimates for buildings

13:27 Engineering-based cost segregation process

18:28 Understanding the R&D Tax Credit

21:45 Understanding R&D tax credits

25:20 Reconfiguring and reusing drywall

28:37 Discovering cost segregation

31:16 Discovering cost segregation loopholes

34:27 Handling IRS audit inquiries

39:05 Remote and Office Work Changes

40:03 Understanding property depreciation rules

45:38 Evaluating building estimates and assets

47:34 Understanding condo tax allocations

51:18 Navigating 1031 exchange complexities

Podcast Transcription:

Tom Brodie [00:00:00]:

So that's a dollar for dollar reduction in the taxes you owe. Cost segregation is a deduction. So that's going to lower your amount of income, which means you pay less taxes. So if you got an R and D tax credit of $20,000 and you had a liability of $20,000, now you owe zero because that's going to wipe out the liability. So tax credits are a little bit more valuable than a deduction as far as the impact.

James [00:00:27]:

You have found Authentic Business Adventures, the business program that brings you the str and triumph and successes of business owners across the land. Downloadable audio episodes can be found in the podcast link found drawincustomers.com we are locally underwritten by the bank of Sun Prairie Calls On Call Extraordinary Answering Service as well as the Bold Business Book. And today we're welcoming, preparing to learn from Tom Brodie of Cost Segregation Services. So Tom, how is it going today?

Tom Brodie [00:00:56]:

It's going very well. Thank you for having me on the program.

James [00:00:59]:

Yeah, I'm glad that you're on here. I love the name of your business because it says exactly what you do. So for those that may not know, can you tell us what is cost segregation?

Tom Brodie [00:01:11]:

Yeah, it's, I know that people stumble over that all the time. What we do is we help commercial building owners depreciate their building faster and say faster just because it's faster than what they're used to. Right. What the CPA or tax preparer will do will take the value of the building and divide it by 39 years or 27 and a half years if it's a apartment complex. What we do is say there's things in your building are not going to last that long. So we do the study to say, okay, you've got this much assets in a five year category, this many assets, you know, in a 15 year category, and break it down that way and then help them depreciate it faster, which means more depreciation expense is less income, which means less income taxes. And so you're really saving a tremendous amount of money in income taxes.

James [00:01:59]:

So when you're talking about assets, can you elaborate on what those are?

Tom Brodie [00:02:04]:

It's a commercial building. I mean, so if you got, you know, you're building, you've got the external walls and everything else, but then you've got so much on the inside, internal walls, you know, H vac controls on the inside, things that are not really key to keeping the structure upright. Those are the things that are going to have a slower, sorry, a faster life. And so you're going to depreciate them faster and then record it's the same dollars, you're just recording it sooner. Right. And so you'll be able to write that off when those things are worth more, the whole time value of money thing. So rather than waiting 39 years to get you, your asset depreciated, you can take about 30% of that on average and record it sooner.

James [00:02:42]:

All right, so you're talking carpet shelving,

Tom Brodie [00:02:47]:

floor coverings, window coverings. Actually outside a building too. Parking lots are a huge expense that people don't think about. That's a 15 year asset. So if you've got a big parking lot, that's going to be something we can write off right away. And then security systems, fencing, you know, irrigation systems, everything outside the building that's not really part of the structure. Those are going to be usually in the 15 year asset category.

James [00:03:11]:

All right, now I understand you're not an accountant, but I'm still going to ask the question because it eludes the question. Hey, instead of this cost segregation or the depreciation being spread out over 39 years or 27 years, you do a chunk of it, 30% ish, right away. What happens if you sell it? Sell the building?

Tom Brodie [00:03:31]:

Well, that's the one thing that we tell people. If you're getting ready to sell it right away, you don't want to do this. Right. Because whenever you sell any building, you're going to have to pay recapture. And so if you accelerate the depreciation and then try to sell it the next year, all that savings is going to be eaten up when you have to pay back the recapture. So we typically tell people three to five years is a, is a good timeframe after cost seg study, you know, to hold it. If you're going to hold it that long, then that reinvested of the savings is going to be able to create a return for you that will offset the recapture. I've had some clients turn around and sell it right away.

Tom Brodie [00:04:07]:

I said, we talked about this, right? You said you weren't going to sell it right away. They said I made so much money I didn't care about it. Okay, as long as you did that, full knowledge that I told you not to sell it right away. But it's one of those things where, you know, things happen and you have to make a move. But we typically think that you've held on to something within three to five years, you're going to be fine.

James [00:04:30]:

Right on. Do the math is what it comes down To, Right, exactly.

Tom Brodie [00:04:34]:

I mean we, we always, we give free estimates because that's the one thing that people don't understand. How much. These are big numbers, right. A lot of times. And so when you actually see the number there and then you put it into your calculation to see if this makes financial sense, a lot of people are surprised by the number to go. I didn't know this was available. Yeah, it is.

James [00:04:54]:

Can you. Let's just talk the numbers and let's keep it relatively easy. Just for Neanderthals like me that aren't that good at math, let's just say for fun, we got a million dollar building, right? I just bought this million dollar commercial building, office space, warehouse space. I don't know if it matters. Can you just walk me through the numbers I can expect and then what that turns into, as far as money in my pocket goes?

Tom Brodie [00:05:17]:

Absolutely. Now every building's gonna be a little bit different. Like so if an office building is gonna have more things that you can actually accelerate than if you had just a metal warehouse. Right. Metal warehouse is pretty much a box. But if an office building got a lot of things on the inside of that building that you can depreciate million dollars on average, I'm usually finding a deduction, a tax deduction equal to about 20 to 25% of the building's value. Now I say building's value because you have to subtract land, right? So if it costs you a million dollars, you take the land out. Maybe you're like $800,000 or something like that.

Tom Brodie [00:05:52]:

So it's 20% of that building. Only value that could be in a depreciation deduction, right? So that's, and with, with 100% bonus depreciation coming back, all those things that are accelerate acceleratable are things that you could write off in year one after doing a study. So it, it's significant. So you know, not every building is the same. So the more internal walls and maybe the high end decor elements you have, you have a nice lobby with a lot of high end granite or marble or whatever. Those things cost money. And typically you're not going to ROI on those, right? So if you can write all that stuff off in the first year,...