If you are a self-storage owner, cost segregation is a vital tax tool that you can take advantage of today. A cost segregation study has the potential to put more money in your pocket than most other business tools. The Engineered Tax Services team has helped hundreds of self-storage facility owners increase their cash-flow by accelerating depreciation through cost segregation studies.
It can benefit self-storage facilities in several different ways. When a cost segregation study is performed, it identifies all building components and site improvements qualifying for accelerated depreciation. Cost segregation can help lower property and insurance premiums, as well as real estate tax bills. Another great benefit is that a cost segregation study ensures accurate identification of assets in the case of theft or fire.
What is a Cost Segregation Study?
A cost segregation study is a cash-flow strategy to uncover potential tax savings through the reclassification and depreciation of property – such as a self-storage facility. It is a federal income tax tool that utilizes shorter recovery periods to accelerate the return on capital from property investments. Whether newly constructed, purchased, or renovated, the components of your building may be properly classified into these shorter recovery periods for computing depreciation. The study carves out certain qualifying portions of your building into 5, 7, and 15-year class lives that are normally buried in 27.5 or 39-year class life categories. A cost segregation study is not only beneficial for newly constructed buildings but can also uncover significant tax benefits for older buildings due to catch-up depreciation.
How Engineered Tax Services Does It
An example of how Engineered Tax Services has saved self-storage facility owners thousands of dollars with a cost segregation study is when the qualified engineering team performed a study and review of a 46,400-sq. ft. storage facility and 62,000 sq. ft. parking lot in Hobe Sound, Florida. The benefit from this ended up being a combined 29.08% reclassification of 39-year depreciation class life assets in to 5 and 15-year class lives – resulting in an accelerated benefit of $837,879.33 in total realized tax savings.