Study Overview
This case study examines a grocery store acquired in 2025 for $2,880,000 and applied in the 2025 tax year. By also leveraging 100% bonus depreciation, the cost segregation study reclassified eligible building components into shorter recovery periods, maximizing upfront tax savings resulting in $366,430 in savings.
| Property Type | Grocery Store |
| First-Year Tax Savings | $366,430 |
| Date Placed In-Service | December 2025 |
| Tax year study applied | 2025 |
| Bonus depreciation | 100% |
| Purchase price(less land) | $2,880,000 |
| Accelerated Method | $993,432 |
| Straight-Line Method | $3,082 |
| Increased Deduction | $990,350 |
| Tax Rate | 37% |
Project Overview
A grocery store owner completed a CSSI cost segregation study, which identified assets eligible for accelerated depreciation. Through a detailed engineering analysis, a significant portion of building costs were reclassified from a 39-year depreciation schedule to much shorter recovery periods, putting money back in the owner’s pocket sooner.
Study Results
The detailed engineering analysis successfully reclassified 35% of the total building costs into accelerated depreciation categories:
*Also refer to “Building Allocation After Study” Graph Below
Key Reclassified Assets
5-Year Property ($374,400) included:
- POS systems, computers, tablets, self-checkout kiosks
- Cash registers
- Security/surveillance cameras and DVR systems
- Delivery vehicles (light trucks, vans)
- Forklifts and pallet jacks (used in warehousing/receiving)
- Refrigerated display cases (may qualify as 5-year under asset class 57.0 – Distributive Trades)
15-Year Land Improvements ($633,600) included:
- Parking lot construction or resurfacing
- Landscaping
- Landscaping and plantings
- Fencing
- Outdoor/monument signage
- Sidewalks and driveways
- Qualified Improvement Property (QIP): interior renovations to an existing building (flooring, lighting, drop ceilings, HVAC upgrades, interior walls). Again, the biggest one for retail.
Building Allocation After Study
5-Year
$374,400 Re-allocated
15-Year
$633,600 Re-allocated
39-Year
$1,900,800 Re-allocated
Financial Impact
By accelerating depreciation on $2,880,000 of the property’s cost basis, the study generated substantial first-year tax deductions and meaningfully improved cash flow. Through the identification of personal property and land improvements, the owner was able to take advantage of:
- Bonus depreciation eligibility on qualifying assets
- Accelerated depreciation schedules on shorter-life property
- Enhanced cash flow through reduced tax liability
- Proper cost basis documentation for future disposition analysis
Building Systems Documentation
The study also included thorough documentation of the property’s building systems, a valuable resource for making informed capitalize-vs.-expense decisions in line with IRS Tangible Property Regulations. This documentation gives property owners:
- Current replacement cost benchmarks for each building system
- Detailed asset inventories by depreciable life
- Support for partial disposition elections on future improvements
- Compliance with IRC Section 1.263(a)-3 requirements
Compliance & Methodology
The study was conducted in full accordance with:
- IRS Revenue Procedure 87-56 asset classification guidelines
- Modified Accelerated Cost Recovery System (MACRS) regulations
- IRC Section 168 property classification standards
- Tangible Property Final Regulations (Treasury Decision 9636)
All asset classifications were supported by site inspection, architectural plans, construction documentation, and established engineering cost analysis standards designed to withstand IRS scrutiny.
Why This Matters
This case study illustrates how grocery store owners can unlock meaningful tax savings through a properly executed cost segregation study. By identifying and reclassifying nearly $2,880,000 in assets eligible for accelerated depreciation, the property owner captured significant first-year tax benefits, all while remaining fully compliant with IRS guidelines.
Ready to discover your property’s tax savings potential? Contact CSSI today.
