Cost Segregation Study and 45L Tax Benefits on a Assisted Living Facility

Engineered Tax Services performed a cost segregation engineering review of building components and site improvements on a 32,000 square foot building in Negaunee Michigan. The single story building has various areas devoted to office and nursing station activities, multipurpose, spa & activity rooms, areas devoted to kitchen, dining and laundry plus a salon, therapy and lobby entrance. The cost segregation benefit included a reclassification of 27.5-year depreciation class life assets into 5 and 15 year class lives, resulting in a combined benefit of $1,199,763.72.

Additionally, ETS’ next generation cost segregation study captured $76,000.00 in 45L Residential Energy Efficiency Tax Credit as well as identify $2,286.90 in qualified repairs under the final tangible property repair regulations.

$1,199,763.72 in Total Realized Tax Savings

Class LifePercentageAccelerated Tax
5-Year 16.85%$758,967.74
15-Year9.78%$440,795.98
27.5-Year78.37%$3,305,120.44
Total Total Realized Tax Benefits $4,504,884.16

% amounts relate to how much was reallocated from the depreciated basis

Cost Segregation is based on a 40% tax bracket for federal and State Taxes and performed on the ADR Asset Depreciation Range. Financial benefits are realized by maximizing net present value through deferring tax payments and using increased cash flow to strengthen your portfolio or scale your business. The tables above identify the difference between a cost segregation study and traditional 39.5-year capitalization. The line graph (if shown) demonstrates the impact of investment cash.