Car Dealership and Auto Service Center Cost Segregation Studies
Auto dealerships and car service centers are massive pieces of property that have tons of opportunities for cost segregation to reduce income taxes. When it comes to the interior, there is the showroom, offices, garages, tools, storage areas, and more. While most auto dealership components are tied to a 15-year lifetime depreciation, there are plenty to be found that are five years or even less.
The main source of depreciation is usually the exterior, with massive parking lots, tons of lighting rigs, fencing, signage, and appointment areas. Cost segregation from O’Connor can find all bits of depreciation that can be found and will follow all of the mandates handed down by the IRS. The IRS requires credible methods, results, and documentation, and O’Connor can ensure that you are compliant in all things.
While cost segregation can have an upfront cost, it can quickly be wiped away thanks to massive savings on your income taxes. Auto dealerships typically see a return on their study with a ratio of 2-1 in the first year. This can even expand to a factor of 20-1 or more if there are any escalating forms of depreciation, like bonus or catch-up. The table below shows other car dealerships that O’Connor was able to help on their cost segregation journey.
Sample Study Results
| Depreciable Basis | Purchase Date | Year of Study | 1st Year Additional Depreciation | 1st Year Tax Savings | Year 1 Payback | Initial 5 Years Tax Savings | 5 Year Payback |
|---|---|---|---|---|---|---|---|
| $3,699,701 | 2/1/2015 | 2015 | $199,352 | $78,943 | 21.8:1 | $230,038 | 64.5:1 |
| $500,000 | 4/1/2014 | 2014 | $17,254 | $5,280 | 1.6:1 | $23,156 | 7.9:1 |
| $3,441,738 | 12/1/2014 | 2014 | $27,478 | $10,881 | 3.0:1 | $178,520 | 50.3:1 |
| $5,306,601 | 6/1/2015 | 2015 | $127,482 | $50,483 | 16.1:1 | $248,245 | 80.0:1 |
| $2,226,210 | 6/1/2015 | 2015 | $50,445 | $19,976 | 5.7:1 | $100,674 | 29.7:1 |
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.
