Case Study: Cost Segregation Analysis for a Medical Facility in Brattleboro, VT

Narrative

In 2022, the owners of a medical facility in Brattleboro, VT, sought to optimize their tax savings through strategic tax planning. The property consists of a single two-story building encompassing 5,830 square feet. The medical facility features modern amenities and specialized equipment to cater to its operations.

The building’s exterior includes durable materials and large windows, while the interior is equipped with high-efficiency HVAC systems, water heaters, and contemporary lighting fixtures. The property also includes various site improvements such as parking spaces, landscaping, and utility connections.

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 medical facility'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:

1. Physical Inspection: conducting a thorough site visit to identify and photograph the property's components
2. Document Review: examining architectural plans, construction documents and accounting records
3. Cost Analysis: applying engineering principles to allocate costs to specific asset classifications
4. Depreciation Calculation: calculating depreciation using IRS-accepted methods such as the Modified Accelerated Cost Recovery System (MACRS)

Asset Allocation