Cost Segregation Studies for the United States
Cost segregation was once a little more than a tax loophole for the wealthy. However, once it was codified by the IRS, it became a key strategy for savvy commercial property owners that want to increase their cash flow while also cutting their income taxes. Cost segregation allows an owner to use accelerated depreciation from their business property to shield them from income taxes. In some cases, this can be used to eliminate income taxes entirely, at least for a time. This can even be within the first year of doing a cost segregation study.
The United States has millions of commercial properties, each unique in its own way. From major factories in the recovering Mid-West, to data centers in Virginia, to corporate tech offices in Silicon Valley, each can get protection from income taxes with cost segregation. Depending on additional factors like catch-up and bonus depreciation, cost segregation can hand in an ROI of 3-1, up to 75-1. And that is just in the first year. Short-life deprecation is usually a target. These are items with a lifetime of five, seven, or 15 years, though long-term items with lifetimes of 27.5 and 39 years are also considered.
O’Connor has a team of expert appraisers that have done over 10,000 cost segregation studies. They can either come out and do their work on-site, or they can assist you remotely as you do your own study. We will work with your CPA and employees that know the property, so that we can maximize depreciation while also understanding your income tax needs. When O’Connor, the CPA, and a property owner work together, magic can happen. We will find depreciation inside and outside of your building, getting the best results. To see what we do, examine the following table of other successful cost segregation studies.
Real USA Cost Segregation Results
| 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 | $10,762,660 | APR 2016 | 2016 | $524,247 | $207,602 | 62.5:1 | $947,536 | 286.0:1 |
| Multifamily | $7,489,800 | FEB 2016 | 2015 | $328,163 | $129,953 | 48.1:1 | $680,740 | 220.0:1 |
| Retail | $7,307,800 | MAY 2016 | 2016 | $258,593 | $102,403 | 30.8:1 | $471,298 | 143.0:1 |
| Office Building | $14,492,130 | JUN 2016 | 2016 | $509,649 | $201,821 | 63.6:1 | $996,607 | 315.0:1 |
| Industrial | $6,475,947 | MAR 2016 | 2016 | $126,651 | $50,154 | 13.8:1 | $286,719 | 80.1:1 |
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.