Cost Segregation Studies for Warehouses and Distribution Centers
Warehouses are not only a steady reservoir of property value and income but make an excellent target for cost segregation. Warehouses are suited towards 15-year depreciation rather than shorter types, but those can be found as well with an expert eye. Racking systems and automated mechanical systems are good sources of depreciation found in the interior.
For the exterior of a warehouse or distribution center, parking garages, lots, turning aprons, and over-sized drives are only a few options. O’Connor can find these and more when a cost segregation study is run. Having experts on your side also means that you will be in good shape for any IRS requirements, including methods, results, and units of property.
Cost segregation studies can be a bit of an investment, especially with expert help. But this usually pays off many times over. Warehouse cost segregation typically sees the cost of a report returned by a ratio of 6-1. If bonus or catch-up depreciation is involved, this can be enhanced to even something like 60-1. The following table shows businesses that benefited from one of O’Connor’s cost segregation studies.
| 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 |
|---|---|---|---|---|---|---|---|
| $2,535,697 | 5/1/2014 | 2015 | $204,968 | $81,167* | 28.3:1 | $147,270 | 51.3:1 |
| $13,387,500 | 6/1/2015 | 2015 | $210,322 | $83,287 | 30.6:1 | $393,985 | 146.0:1 |
| $2,364,375 | 5/1/2015 | 2015 | $62,871 | $24,897 | 8.7:1 | $127,423 | 45.4:1 |
| $10,762,660 | 4/1/2016 | 2016 | $524,247 | $207,602 | 62.5:1 | $947,536 | 286.0:1 |
| $1,269,750 | 5/1/2016 | 2016 | $43,482 | $17,219 | 6.0:1 | $80,784 | 29.2:1 |
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.