Cost Segregation Study Accelerates Depreciation for Property Investor
How reclassifying building components unlocked $64,000 in immediate tax savings through accelerated depreciation.
Executive Summary
A real estate investor who recently purchased a commercial building was depreciating the entire property over 39 years. A cost segregation study identified building components that could be depreciated over 5, 7, and 15 years instead, generating significant immediate tax savings through accelerated depreciation and bonus depreciation.
[Detailed executive summary to be provided by client]
The Challenge
The client, a property investor, was missing depreciation opportunities:
- Entire building being depreciated over 39 years
- No analysis of shorter-life building components
- Missing opportunity for bonus depreciation on qualifying assets
- [Additional challenges to be provided]
[Detailed challenge description to be provided by client]
Our Approach
We coordinated a comprehensive cost segregation study with qualified engineering professionals:
Phase 1: Property Analysis
Reviewed purchase documents, appraisals, and construction records to understand the property's components and costs.
Phase 2: Engineering Study
Conducted detailed engineering analysis to identify and value building components eligible for shorter depreciation lives (5, 7, and 15 years).
Phase 3: Tax Impact Analysis
Calculated the tax impact of reclassifying assets, including application of bonus depreciation to qualifying property.
Phase 4: Implementation
Prepared required documentation and adjusted depreciation schedules. Filed Form 3115 to change accounting method for prior year properties.
[Detailed approach to be provided by client]
The Results
[Detailed results to be provided by client]
Key Takeaways
Cost segregation can significantly accelerate tax deductions for property owners.
Studies can be performed on existing properties, not just new acquisitions.
Bonus depreciation rules make cost segregation even more valuable for recent purchases.
Quick Facts
- Industry
- Real Estate
- Property Type
- [To be provided]
- Tax Savings
- $64,000
- Strategy Used
- Cost Segregation + Bonus Depreciation
- Timeline
- [To be provided]
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