Property Overview
This case study analyzes a Restaurant acquired in July 2019 for $2,652,877 (excluding land). The study was applied to the 2020 tax year, utilizing a 37% tax rate and an 8% present value rate of return.
With 80% bonus depreciation, the facility’s owners were able to maximize their upfront tax benefits, reducing taxable income and enhancing cash flow. The cost segregation study strategically categorized building components into shorter depreciation periods, creating significant tax savings opportunities.
| Property Type | Restaurant |
| Purchase price(less land) | $2,652,877 |
| Building sqft | 6,500 |
| Entire site sqft | 50,975 |
| Data acquired | July 2019 |
| Tax year study applied | 2020 |
| Tax rate | 37.0% |
| Present value rate of return | 8% |
| Bonus depreciation | 80% |
Building Allocation After Study
Cost Segregation Study Benefits
The cost segregation study provided significant tax savings for the hotel property, delivering an impressive $464,126 in tax savings within the first year. Over a 10-year period, the net present value (NPV) of savings reached $384,554, while the total NPV over the remaining life of the property amounted to $315,850. When reinvested, these savings equate to a future value of $5,882,790.
Additionally, the study reallocated building components into accelerated depreciation categories, with $606,846 assigned to 5-year property, $449,822 to 15-year property, and $1,349,731 to 39-year property, allowing for substantial upfront deductions and improved cash flow.
Financial Benefits Achieved
| Immediate Tax Savings | $464,126 |
| NPV Over 10 Years | $384,554 |
| NPV Over Remaining Life of Property | $315,850 |
| Future Value of Invested Savings | $5,882,790 |