Cost Segregation Studies for Restaurants
Restaurants have a lot of unique short-life components that can be used for cost segregation. Special HVAC units, kitchen appliances, industrial stoves and ovens, and special gas/electric devices are just a few. Then, there is the service area and other places that serve the public.
This can be extended to the exterior as well, with things such as landscaping, signage, the parking lot, and outdoor lighting. Cost segregation by O’Connor can find every bit of depreciation and break it down into an accurate report that will please the IRS. The IRS requires credible methods, results, and documentation, all of which O’Connor can provide.
Cost segregation may be a large expense, but it is one that will easily pay for itself several times over, and that is just in one year. Many restaurants will see an ROI of 6-1 in the first year. This can go up to over 40-1 if there are other circumstances, such as bonus depreciation or catch-up for previously underutilized factors. Consult the table below to see how O’Connor was able to help other restaurant clients.
Real Restaurant Clients That Saved on Their Income Taxes
| 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 |
|---|---|---|---|---|---|---|---|
| $2,307,677 | 8/1/2014 | 2014 | $152,678 | $60,460 | 22.8:1 | $254,663 | 97.1:1 |
| $6,624,612 | 3/1/2014 | 2014 | $354,238 | $140,278 | 38.4:1 | $624,762 | 172.0:1 |
| $680,000 | 5/1/2016 | 2016 | $47,001 | $18,612 | 8.3:1 | $82,554 | 37.9:1 |
| $1,417,927 | 12/1/2014 | 2014 | $171,263 | $67,820 | 5.9:1 | $83,986 | 74.1:1 |
| $660,318 | 4/1/2013 | 2014 | $81,082 | $32,109* | 30.2:1 | $58,812 | 56.3:1 |
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.
