Narrative
In 2024, the owners of an office highrise in Bradenton, Florida, undertook strategic tax planning to enhance their investment. The property consists of a two 8-story building encompassing 79,152 square feet. Originally constructed in 1976, the office highrise features modern amenities and finishes.
The building's exterior showcases a blend of architectural elements, including a glass curtain wall system and metal roof deck. The interior is well-appointed, featuring amenities such as high-efficiency HVAC systems, elevators, and contemporary lighting fixtures. The property also includes ample parking and attractive 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 office highrise'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: $2,743,119.22
Percentage of Total Depreciable Basis: 18.45%
5-year class life assets identified in this study include:
- Electrical systems and equipment
- Security systems
- Decorative lighting and wall coverings
- Millwork and cabinetry
- Certain flooring and ceiling elements
15-Year Class Life
Total Depreciation Allocation: $1,721,643.92
Percentage of Total Depreciable Basis: 11.58%
15-year class life assets identified in this study include:
- Site utilities and infrastructure
- Paving, curbing and landscaping
- Certain plumbing components
39-Year Class Life
Total Depreciation Allocation: $10,399,589.86
Percentage of Total Depreciable Basis: 69.96%
39-year class life assets identified in this study include:
- Building structure and envelope
- HVAC and elevator systems
- Restroom fixtures and partitions
- Fire protection systems
- Permanent interior walls and doors
Class Life Details:
Summary
The cost segregation study for this office highrise in Bradenton, 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 office highrise'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