Magic in Milwaukee: a Cost Segregation Possibilities Story

I’m a woman who’s a restaurant owner. Last year I purchased a Japanese restaurant in, of all places, Milwaukee, Wisconsin. I really wanted to renovate it, but I was concerned about the construction cost. With a startup business, how could I afford the renovations?

Then last year, I was reading Forbes online when I came across an article entitled Decreasing Your Tax Burden With A Cost Segregation Study. It really opened my eyes to what I could be missing out on.

 

What I Didn't Know About This Accounting Method

You see, cost segregation is an accounting method that’s recognizes your property isn’t just a single entity, but made up of a lot of parts, known as subcomponents, like your lighting system and heating and air conditioning system. As time goes on, these wear out and lose value—they depreciate. A cost segregation study breaks down how much your subcomponents are expected to last into 5-, 7- or 15-year categories, so you can calculate how much in taxes you’re entitled to write off.

According to this article, a cost segregation study could not only save me a lot in taxes—it could even fund those renovations I wanted done.

The next night I had dinner with a friend of mine who’s a real estate attorney. This stuff about cost seg sounded like something out of Harry Potter, like magic—the secret tax technique that will solve all my problems! I asked her about whether the article I read in Forbes was accurate. I even showed her a printout.

The information here is totally legit, she said. You could save a bundle in taxes right off the bat. And yes, you could even pay to fix up the restaurant.

That’s amazing. This is like a dream come true. I know I can attract a lot more business if the place is spruced up.

Keiko, you just bought the place this year, is that right?

That’s correct.

Perfect. It’s always best to conduct a cost seg study on a property the year you purchase it. And there’s another benefit to having a cost seg study done.” (Sometimes it really helps to have a friend who’s a real estate attorney.) “Because a cost seg study can recalculate the replacement costs for your insurance carrier, you might be able to save on insurance premium costs and property tax appeals.

How do I get started?

I’ll put you in touch with a specialty tax practice I’ve worked with. They’re called Engineered Tax Services, ETS. They have qualified engineers on staff who know how to undertake cost seg studies.

They Found Major Tax Benefits For Me

ETS did a free feasibility study that indicated I could reap major tax benefits. After I gave them the information they wanted, they conducted an onsite inspection. The result? I paid $840,000 to buy my restaurant specializing in Hokkaido cuisine—but thanks to the cost seg study, I was awarded first-year bonus depreciation of $427,200. Later I learned that without the study, I only would have received approximately $21,500. My study netted me $425,700 extra!

What did I do with my $427,200 tax savings? I fixed up the place and installed new computer systems. Now there’s a new kitchen, the dining room has been enlarged, the Wi-Fi is flawless, and guests can order from a tablet computer from the convenience of their tables!

Thanks to an investment in a cost segregation study, I was able to help my business reach its full potential. And it wasn’t magic! It was accounting.

Author

Engineered Tax Services

Engineered Tax Services

Recent Posts

cost segregation for hotels

How Cost Segregation for Hotels Drives Profitability

In the hospitality industry, every strategy that leads to operational efficiency and financial stability is worth exploring. Among these, cost segregation stands out as a beacon for hotel owners. Hotels encompass a wide array of assets—ranging from luxurious furnishings to advanced kitchen equipment—all of which depreciate at different rates. Harnessing the power of cost segregation

Read More »

Can You Amend a Tax Return to Take Bonus Depreciation?

Let’s face it, no one wants to pay more taxes than they absolutely have to, especially when every dollar counts towards your business’s growth and stability. One often-overlooked tax savings opportunity is bonus depreciation, an IRS-approved tax strategy that allows you to deduct a large portion of asset costs in the first year. If you’ve

Read More »

179D vs. 45L Tax Credits: A Comparative Look at Energy Tax Incentives

When it comes to making homes and buildings more energy efficient, tax credits and deductions can provide helpful financial incentives. Two major options are the 179D tax deduction for commercial buildings and the 45L tax credit for residential properties. But how do these two programs compare? Let’s take a closer look. The Core Idea The

Read More »

Contact Us