Narrative
In 2022, the owners of a dialysis facility in Tampa, Florida undertook strategic tax planning to enhance their investment. The property consists of a single 1-story building encompassing 10,456 square feet. Originally constructed in 1964, the medical building features 1 tenant space designed to cater to patients.
The building showcases a blend of architectural elements, including a durable stucco over masonry exterior finish and storefront windows. The interior is well-appointed, featuring amenities such as high-efficiency HVAC rooftop units, a fire sprinkler system, and contemporary lighting fixtures. The property also includes site improvements such as asphalt paving, concrete sidewalks, and landscaping.
The owners engaged Engineered Tax Services (ETS) to perform a comprehensive cost segregation study of the property. This study aimed to identify and reclassify specific assets, enabling the acceleration of depreciation and optimizing tax benefits. This case study outlines the cost segregation strategy employed and its significant impact on the financial outlook of the property.
Objective
The primary objective of the cost segregation study was to identify and classify the dialysis facility assets to optimize the owners' tax savings. By breaking down and reallocating components into shorter depreciation life categories, ETS aimed to provide both immediate and long-term financial benefits through accelerated depreciation.
Methodology
ETS employed a detailed, engineering-based approach, which included:
- Physical Inspection: conducting a thorough site visit to identify and photograph the property's components
- Document Review: examining architectural plans, construction documents and accounting records
- Cost Analysis: applying engineering principles to allocate costs to specific asset classifications
- Depreciation Calculation: calculating depreciation using IRS-accepted methods such as the Modified Accelerated Cost Recovery System (MACRS)
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Discover MoreAsset Allocation
5-Year Class Life
Total Depreciation Allocation: $744,453.52
Percentage of Total Depreciable Basis: 29.04%
5-year class life assets identified in this study include:
- Dedicated dialysis in-floor scale
- Dialysis treatment chairs and stations
- Medical and kitchen equipment
- Computer, telephone and television connections
- Decorative lighting and window treatments
15-Year Class Life
Total Depreciation Allocation: $273,595.92
Percentage of Total Depreciable Basis: 10.67%
15-year class life assets identified in this study include:
- Site improvements (asphalt paving, concrete sidewalks, fencing)
- Landscaping and irrigation
- Storm drainage and catch basins
- Site lighting and signage
39-Year Class Life
Total Depreciation Allocation: $1,545,065.22
Percentage of Total Depreciable Basis: 60.28%
39-year class life assets identified in this study include:
- Building structure and exterior finishes
- Roof system
- Plumbing, HVAC and electrical systems
- Restroom fixtures and accessories
- Interior doors, walls and ceilings
Class Life Details:
Summary
The cost segregation study for this dialysis facility in Tampa, Florida demonstrates the substantial financial advantages of strategic tax planning. By reclassifying property components into shorter depreciation categories, the study enabled accelerated depreciation, resulting in maximized tax savings and improved cashflow. This approach not only enhanced the dialysis facility's profitability but also allowed for more efficient capital management and future property upgrades. The case study illustrates how cost segregation can significantly boost the financial performance of real estate investments.
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