Narrative
In 2023, the owners of a gas station and car wash in Albuquerque, New Mexico, undertook strategic tax planning to enhance their investment. The property consists of a single one-story building encompassing 5,570 square feet. Originally constructed in 2021, the facility features a gas station, convenience store, and an automated conveyor car wash designed to serve a variety of customers.
The building's exterior showcases modern architectural elements, including durable finishes and large windows. The interior is well-appointed, featuring amenities such as high-efficiency HVAC systems, water heaters, and contemporary lighting fixtures. The property also includes specialized car wash equipment such as a conveyor system, vacuum stations, and an air dry blower system.
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 gas station and car wash's 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)
Learn More About Cost Segregation
Explore the benefits of cost segregation and how it can enhance your property's profitability. Dive deeper into our strategies.
Discover MoreAsset Allocation
5-Year Class Life
Total Depreciation Allocation: $1,765,398.94
Percentage of Total Depreciable Basis: 44.81%
5-year class life assets identified in this study include:
- Car wash conveyor system, vacuum stations, air dry blower system
- Specialized electrical systems and dedicated equipment outlets
- Furniture, fixtures, and equipment (FFE)
- Signage
- Certain interior finishes and decor
15-Year Class Life
Total Depreciation Allocation: $2,174,669.06
Percentage of Total Depreciable Basis: 55.19%
15-year class life assets identified in this study include:
- Land improvements (paving, curbing, site lighting)
- Certain mechanical, electrical, and plumbing (MEP) systems
- Exterior windows, doors, and finishes
- Structural components specific to the car wash
Class Life Details:
Summary
The cost segregation study for this gas station and car wash in Albuquerque, New Mexico 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 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.
Unlock Your Tax Savings
Discover how cost segregation can maximize your tax benefits and improve cash flow. Get started today with a free consultation.
Get Your Free Consultation