Cost Segregation Studies for Banks and Financial Institutions
Banks are one of the best sources you can find for a cost segregation study. Most things are already documented, and the majority of property is confined to the interior of the bank. The teller area, vault, safety deposit boxes, furnishings, carpeting, and countless other things that make a bank what it is can be used for short-life depreciation.
Exterior components, such as parking, lighting, and signage can also be depreciated for cost segregation purposes, and long-term items can be added as well. When O’Connor does a cost segregation, every piece of evidence is recorded as directed by the IRS. The IRS requires accurate methods, results, and documentation, things that O’Connor will provide and stand by.
It can be a big expense upfront to do cost segregation, but it is always worth it. Banks usually see a return on their investment at a ratio of 4-1, and this is just for the first year. This number can go as high as 40-1, if there are enough factors, like catch-up and bonus depreciation. The following table shows clients that benefited from their bank being cost segregated by O’Connor.
Real Banks That had Cost Segregation
| Depreciable Basis | Purchase Date | Year of Study | 1st Year Tax Savings | Year 1 Payback | Initial 5 Years Tax Savings | 5 Year Payback | |
|---|---|---|---|---|---|---|---|
| $4,136,991 | 5/1/2015 | 2015 | $123,502 | $48,728 | 16.1:1/td> | $238,063 | 79.8:1 |
| $2,991,101 | 12/1/2014 | 2014 | $175,877 | $69,647 | 23.1:1 | $280,474 | 93.9:1 |
| $14,000,000 | 7/1/2011 | 2011 | $269,410 | $112,748 | 43.1:1 | $459,380 | 177.0:1 |
| $1,873,373 | 5/1/2016 | 2016 | $75,770 | $30,005 | 9.9:1 | $137,974 | 46.7:1 |
| $1,273,477 | 1/1/2012 | 2012 | $32,658 | $11,430 | 3.9:1 | $61,831 | 22.1:1 |
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.