Cost Segregation Study
We at O’Connor have made cost segregation one of our unique specialties. We have completed thousands of studies all across America, building a knowledge base with practical experience that few can match. Take a look at a few commercial properties that serve as an example of what cost segregation can do for a business.
Example No. 1: Apartment Complex
This multi-family complex in a major Texas urban area is the standard garden apartment arrangement. Built in the 1980s, the complex has typical surface parking and 225 living spaces.
The study utilizes two years of catch-up when calculating depreciation. The improvement basis for the complex is $8,250,000.
| Year of Purchase | Year of Study | 1st Year Additional Depreciation | 1st Year Tax Savings | Initial 5 Years |
|---|---|---|---|---|
| 2013 | 2015 | $1,536,853 | $608,594 | $774,974 |
Example No. 2: Hotel
This is a pretty standard hotel property in Arizona. Built in the 2000s, the hospitality property has an improvement basis of $6,800,000. Features include surface-level parking and 90 rooms.
| Year of Purchase | Year of Study | 1st Year Additional Depreciation | 1st Year Tax Savings | Initial 5 Years |
|---|---|---|---|---|
| 2015 | 2015 | $386,824 | $153,182 | $719,294 |
Example No. 3: Low-Rise Office
This Massachusetts office building has an improvement basis of $1,600,000. Built in the 1980s, the property has a total area of 98,000 square feet.
| Year of Purchase | Year of Study | 1st Year Additional Depreciation | 1st Year Tax Savings | Initial 5 Years |
|---|---|---|---|---|
| 2016 | 2016 | $51,442 | $20,371 | $109,934 |
Example No. 4: Warehouse
This example is the standard office warehouse with a total area of 30,000 square feet. Built in Colorado in the 1980s, this commercial property has an estimated improvement basis of $2,500,000.
| Year of Purchase | Year of Study | 1st Year Additional Depreciation | 1st Year Tax Savings | Initial 5 Years |
|---|---|---|---|---|
| 2016 | 2016 | $86,856 | $34,395 | $189,746 |
Example No. 5: Neighborhood Shopping Center
This shopping center was built in North Carolina during the late 1980s. It used the standard neighborhood shopping center design for the time, with a total area of 100,000 square feet. The estimated improvement basis is $19,000,000. We added this to demonstrate mid-quarter depreciation, as it was purchased during the fourth quarter of the year.
| Year of Purchase | Year of Study | 1st Year Additional Depreciation | 1st Year Tax Savings | Initial 5 Years |
|---|---|---|---|---|
| 2015 | 2015 | $242,326 | $95,961 | $1,651,836 |