Property Overview
This modern industrial facility, acquired in June 2020, encompasses 38,153 square feet of building space situated on a large 167,706 square foot site. With a purchase price of $5.4 million (excluding land value), this property represents a significant investment in industrial infrastructure. The facility’s construction includes various specialized components critical to industrial operations, making it an ideal candidate for cost segregation analysis
| Property Type | Industrial Facility |
| Purchase price(less land) | $5,431,703 |
| Building sqft | 38,153 |
| Entire site sqft | 167,706 |
| Data acquired | June 2020 |
| Tax year study applied | 2020 |
| Tax rate | 37% |
| Present value rate of return | 8% |
| Bonus depreciation | 100% |
Building Allocation After Study
Cost Segregation Study Benefits
Through a detailed engineering analysis, CSSI identified substantial opportunities for accelerated depreciation, with over $1.8 million in assets qualifying for 5-, 7-, and 15-year property classifications. The study generated first-year tax savings of $670,299, leveraging 100% bonus depreciation available for qualifying assets. Beyond immediate benefits, the analysis provides long-term value with a net present value of $551,701 over 10 years. When considering the future value of invested savings, the owner stands to gain over $9.2 million in potential future value, showing the significant financial impact of cost segregation for industrial properties.
Financial Benefits Achieved
| Immediate Tax Savings | $ 670,299 |
| NPV Over 10 Years | $551,701 |
| NPV Over Remaining Life of Property | $460, 825 |
| Future Value of Invested Savings | $9,269,626 |
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Frequently Asked Questions
What is the benefit of a cost segregation study?
A Cost Segregation study reduces a building owner’s income taxes up to $100,000 for every $1 mill in building costs. The tax savings are anywhere from 3-10% of the building cost.
What is a cost segregation study?
A cost segregation study is an engineering-based analysis that reclassifies commercial real estate components and improvements between real and personal property. This reclassification accelerates the depreciable lives from 27.5- or 39-years to 5-, 7-, or 15-years.
What real estate components can typically be accelerated through a cost segregation study?
A cost segregation study can typically accelerate depreciation on many building components, including:
- Electrical installations (e.g., dedicated computer power, special lighting)
- Plumbing systems (e.g., kitchen plumbing, bathroom fixtures)
- HVAC components
- Flooring (e.g., carpet, vinyl, tile)
- Window treatments
- Cabinetry and countertops
- Decorative finishes and millwork
- Security systems
- Fire protection systems
- Parking lot paving and lighting
- Landscaping and site improvements
- Certain building exterior components
Does my property qualify for a cost segregation study?
Your property likely qualifies if:
- It’s a commercial building or building improvements with a remaining depreciable basis
- The building or improvement cost basis is at least $200,000
- You anticipate holding the property for at least three years
When should a cost segregation study be done?
A study can be completed in the year the building or improvements are placed in service. However, it can also be done on properties acquired or constructed since 1986 without amending prior years’ tax returns.
How long does a cost segregation study take?
A cost segregation study typically takes approximately three to six weeks from the time we receive all the appropriate documentation.
What information is needed to complete a cost segregation study?
Generally, we request:
- A current tax depreciation schedule
- Building cost information
- Blueprints or architectural drawings and renovation plans, if applicable
- Access to the property for an on-site inspection and walk-through
How much can I save with a cost segregation study?
Savings vary, but within the first five years of building ownership, owners could save up to $100,000 for every $1 million in building costs.
Will a cost segregation study trigger an audit?
No, a properly conducted cost segregation study has never triggered an audit. In fact, if you are audited for any reason and the study comes into question, CSSI will defend the audit at no cost.
Can a cost segregation study be done on buildings not yet constructed?
While a full study can’t be done on unconstructed buildings, CSSI can provide estimates on tax savings from your construction budgets. A full study will be delivered when construction is complete.
