Cost Segregation Studies for Green Buildings
Green buildings make an excellent candidate for cost segregation. Not only do they benefit from the same depreciation factors as regular office buildings, but they feature components with even shorter lifetimes. This can be seen in the very components that make a green building “green” and many have a lifetime of only five years. Add traditional office suites, common areas, and accouterments to the mix as well.
Even the exterior of a green building carries significant depreciation value. Parking lots, garages, external lighting, fencing, signage, and more can be used to increase both short and long-term depreciation. The IRS mandates that all cost segregation requires accurate methods, results, and documentation. O’Connor can guarantee all of this, while also getting you the best deal.
The expense of a cost segregation effort for a green building can seem steep at first, but that initial investment can quickly be overshadowed by savings in income taxes. It is routine to see a green property have its study cost paid back by a ratio of 3-1. If there are other circumstances, including catch-up and bonus depreciation, then this can be expanded to 75-1. And that is savings just for the first year. The following table shows other green buildings that were able to land extensive depreciation thanks to O’Connor.
Real Green Buildings that Benefited from Cost Segregation
| Depreciable Basis | Purchase price | Purchase Date | Year of Study | 1st Year Tax Savings | Year 1 Payback | Initial 5 Years Tax Savings | 5 Year Payback |
|---|---|---|---|---|---|---|---|
| $11,116,528 | 10/1/2015 | 2015 | $433,309 | $151,658 | 47.6:1 | $652,050 | 206.0:1 |
| $8,001,552 | 3/1/2016 | 2016 | $215,251 | $83,948 | 27.5:1 | $415,806 | 137.0:1 |
| $9,193,781 | 1/1/2015 | 2015 | $230,700 | $80,745 | 27.6:1 | $419,244 | 144.0:1 |
| $4,996,171 | 9/1/2015 | 2015 | $154,195 | $60,136 | 19.7:1 | $266,203 | 88.3:1 |
| $10,131,646 | 8/1/2013 | 2013 | $239,923 | $95,009 | 31.5:1 | $442,523 | 148.0:1 |
Results
* Results from “Catch Up” studies which allow the owner of properties purchased in previous tax years to benefit from cost segregation in the current tax year without filing amended returns.
NOTE: The above listed tax savings are based on a 39.6% tax rate for the owner.