Real Estate Investors Benefit from Cost Segregation for Restaurants
Real estate investors in the restaurant business face a myriad of challenges in operating a successful restaurant. These include a fickle public looking for what’s hot and new and a large low to middle-income labor force and containing costs. Restaurant investors also have to do an excellent job of maintaining good-quality food consistently and work long hours.
Because it is so difficult to successfully operate a restaurant, restaurant owners should exert some effort to protect their earnings from excess federal income taxes. Cost segregation offers real estate investors an option to increase tax deductions by increasing depreciation. Property taxes can be a substantial cost in states where property taxes are a high and assessors are aggressive, such as Texas.
Many depreciation schedules only have two categories: land and building. Cost segregation refines the depreciation schedule by including up to 130 components (instead of just two). Cost segregation is different than component depreciation. While the results are similar, the methodology is substantially different. Component depreciation ended in the early 1980s. Cost segregation became available in 1996.
Tax benefits of cost segregation include both tax reduction and tax deferral. Federal income taxes are reduced because depreciation effectively changes the character of the income. Restaurant real estate owners pay taxes at the capital gains rate (up to 15%) instead of at the ordinary income rate (up to 35%) to the extent depreciation is increased. Cost segregation also defers payment of income taxes. Depreciation is a non-cash tax deduction that decreases taxable income. Income taxes are lower in the year income is earned because of higher levels of depreciation. When the restaurant is sold, the investor pays federal taxes at the capital gains rate instead of at the ordinary income rate. Cost segregation effectively generates an interest-free loan from the federal government.
Real estate investors in the restaurant industry work hard to succeed. Keep more of what you have earned by correctly depreciating your real estate.
Click here for a FREE preliminary analysis of tax savings resulting from your property.
Cost segregation produces tax deductions and reduces federal income taxes across the country and in every size market. Below are just a few examples of where cost segregation generates meaningful tax deductions.
City:
- Miami, FL
- Denver, CO
- Phoenix, AZ
- Atlanta, GA
- Dallas/Ft. Worth, TX
- Tampa, FL
- Baltimore, MD
- Memphis, TN
- Philadelphia, PA
- Las Vegas, NV
- Little Rock, AR
- Tulsa, OK
- Madison, WI
- Portland, OR
- Nashville, TN
- Rochester, NY
- Allentown, PA
- Colorado Springs, CO
- Lancaster, PA
- Santa Rosa, CA
- Columbia, SC
- Greenville, SC
- Albany, NY
- Birmingham, AL
- Des Moines, IA
- Scranton, PA
- Greensboro, NC
- Kansas City, MO
- San Jose, CA
- New Haven, CT
Cost segregation produces tax deductions for virtually all property types.
Property Type:
- Retirement home
- Single-tenant retail
- Greenhouse
- Neighborhood shopping center
- Self-storage
- Student housing
- Retail
- Subsidized housing
- Regional mall
- Convenience store
Almost every industry, including the following, can generate cost-efficient tax deductions by using cost segregation.
Industry:
- Electronic and appliance stores
- Paper manufacturing
- Furniture stores
- Computer and electronic manufacturing
- Truck transportation
- Apparrel manufacturing
- Food and beverage stores
- Food manufacturing
- Electrical component manufacturing
- Metal manufacturing
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