Denver Cost Segregation
While a destination for people around the globe since the days of the Old West, Denver has seen itself become one of the hottest places to live in the nation. Boasting culture, entertainment, great weather, and some of the best scenery to be found in North America, the mile-high city brings in residents and tourists alike. This demand is pushing for higher property taxes, not only for homes, but businesses as well.
Cost segregation is here to help balance things out. While it will not lower property taxes, it can be used to calculate depreciation for short-life and long-term components of commercial property. This can then be used to lower income taxes, often eliminating them entirely in the first year. This can be used for any commercial property, including apartments, rental homes, communications, manufacturing, and green buildings.
The team at O’Connor can do a cost segregation study for you. The IRS may back cost segregation, but there are strict rules on methods, results, and documentation. O’Connor’s appraisers and experts know these requirements well and are also very knowledgeable about Colorado and Denver. The following table shows a few Denver commercial properties that were able to save with O’Connor.
Denver, CO Cost Segregation Studies
| Asset Type | 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 |
|---|---|---|---|---|---|---|---|---|
| Warehouse | $2,520,000 | 01/01/16 | 2016 | $86,856 | $34,395 | 11.0:1 | $171,850 | 55.7:1 |
| Multifamily | $60,203,520 | 06/01/16 | 2016 | $2,402,765 | $951,495 | 300.0:1 | $4,154,184 | 1311.0:1 |
| Office | $2,220,000 | 03/01/14 | 2014 | $74,286 | $29,417 | 10.3:1 | $128,608 | 46.1:1 |
| Auto Dealer | $1,884,514 | 05/01/13 | 2014 | $140,808 | $55,760 | 46.2:1 | $115,618 | 96.7:1 |
| Retail | $6,579,369 | 12/01/13 | 2015 | $824,804 | $326,622 | 104.0:1 | $502,556 | 161.0:1 |
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.
** Mid-Quarter depreciation convention utilized due to purchase date.
NOTE: The above listed tax savings are based on a 39.6% tax rate for the owner.