$1,602,187.41 in first-year tax savings
Without a Cost Segregation study, a $37.5 million multifamily apartment complex in Richmond, CA purchased in 2016 would have generated a 1st year depreciation of $1,309,090.91. By applying a cost segregation study, the property investors accelerate depreciation, for the 1st year to $5,972,998.48. This acceleration in deprecation allows the property investors to reduce their tax liability and in turn increase their bottom line. By breaking down the building asset into components, a cost segregation also aids in future benefits of abandonment, repairs, routine maintenance and overall asset management. ETS performs hundreds of cost segregation studies monthly for property owners, providing a detailed engineering review of assets including special purpose mechanical and electrical systems, decorative finishes, site improvements, and any process related to special purpose construction.
| Study Type (Shopping Center-Boynton Beach Florida) | Class Life | Percentage | Accelerated Tax |
| Cost Segregation | 5-Year | 21.81% | $1,601,990.88 |
| Cost Segregation | 15-Year | 12.34% | $233,665.54 |
| Cost Segregation | 39-Year | 65.85% | $322,894.63 |
| Total 1st Yr Depreciation with Cost Seg | $2,158,551.05 | ||
| Depreciation 1st Yr without Cost seg | 39-Year | 100% | $556,363.64 |
| Total Difference in depreciation 1st Year | $1,602,187.41 |
% 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.
Cost Segregation
Engineered Tax Services, Inc. (ETS) has helped thousands of property owners nationally increase their cash-flow by accelerating depreciation through our cost segregation studies. Our cost segregation studies work to uncover potential tax savings and increase cash flow through reclassification and depreciation of property. ETS provides a “Detailed Engineering” review as part of our reporting process, working seamlessly with the IRS and your CPA firm for minimal disruption to your business.
Disposition
When you undertake demolition or renovate a building and tear out old lighting, HVAC units, and other building parts, these assets are disposed of. As such, their book value can be treated as a business deduction. Tangible personal property within a structure can be written off when a building is demolished or remodeled. The value must have been identified prior to the demolition and it must not have been purchased with the intent to demolish. Learn more about the disposition studies here or visit our disposition calculator here.
