www.thetaxreductionproject.com

Phone  630/359-8211

LinkedIn

Why become a referral partner with Cost Segregation Services?

What is cost segregation and how can it benefit my clients?

Most commercial property owners can benefit from a cost segregation study on their commercial property. Cost segregation is a tax strategy used by commercial property owners and investors to reclassify certain assets within a property as personal property, rather than real property. This allows for a faster depreciation schedule, resulting in a larger tax deduction in the short-term. The goal of cost segregation is to accelerate depreciation deductions and reduce the overall tax liability for the property owner. It is typically used for commercial and rental properties, and is usually conducted by a professional engineer or a cost segregation specialist.

When an accelerated depreciation schedule is implemented, typically, current taxable income will be greatly reduced and your client could realize a cash flow increase of $60,000 to $100,000 for every $1,000,000 of building cost in the first year. This is your money that your clients can use to pay down other debt or invest in additional income producing properties.  

The Tax Cuts and Jobs Act (TCJA) now allows 100% bonus depreciation for all the personal property and land improvement property constructed or acquired between 9/27/17, and 12/31/2022. What this means is that all property classified as eligible for 5, 7, or 15 year depreciation can be written off in one year. This is equivalent to expensing these items.

In 2023, the bonus depreciation is reduced to 80% applied in the first year and the remaining 20% spread over 5, 7, or 15 years. Act now to take advantage of the bonus depreciation while it lasts.

The best time to conduct a cost segregation study is in the year the building is acquired, constructed or remodeled. However, you can have a look-back study done any time afterwards and claim the resulting write-offs without amending prior-year tax returns.

Our Process

All properties are different and a formal engineering based cost segregation analysis, performed by a building engineering organization, is recommended in order to implement an accelerated depreciation schedule. Cost Segregation Services Inc. offers a free initial estimate that will identify potential tax savings on your clients property and quote the cost for the analysis.


Refer a Client

Examples

Case Study – Retail Store

Date Purchased: December 2020

Purchase Amount: $1,213,420

1st Year - Straight-line Depreciation: $1298

1st Year – Cost Segregation $327,510

Percent Reclassed: 27%

Tax benefit assuming 37% tax rate: $121,178

CSSI Fee: $4990

R.O.I. $24:1

Case Study – Strip Mall

Date Purchased: July 2021

Purchase Amount: $4,250,000

1st Year - Straight-line Depreciation: $54,4087

1st Year – Cost Segregation $1,275,000

Percent Reclassed: 30%

Tax benefit assuming 37% tax rate: $471,750

CSSI Fee: $6500

R.O.I. $73:1

Case Study – Fast Food Restaurant

Date Purchased: October 2020

Purchase Amount: $1,912,500

1st Year - Straight-line Depreciation: $10,232

1st Year – Cost Segregation $889,080

Percent Reclassed: 46%

Tax benefit assuming 37% tax rate: $325,174

CSSI Fee: $6000

R.O.I. $54:1

Case Study – Gas/Retail (< 50% gas sales)

Date Purchased:   September 2021

Purchase Amount:  $2,400,000

1st Year - Straight-line Depreciation: $17,976

1st Year – Cost Segregation: $1,555,200

Percent Reclassed: 65%

Tax benefit assuming 37% tax rate:  $571,114

CSSI Fee:   $6250

R.O.I.  $91:1

Case Study – Gas/Retail (> 50% gas sales)

Date Purchased:  September 2021

Purchase Amount: $5,894,513

1st Year - Straight-line Depreciation   $196,287

1st Year – Cost Segregation $5,894,513

Percent Reclassed: 100%

Tax benefit assuming 37% tax rate:  $2,108,133

CSSI Fee:   $6990

R.O.I.  $301:1


Case Study – Bank

Date Purchased: November 2020

Purchase Amount: $4,140,000

1st Year - Straight-line Depreciation: $119,439 

1st Year – Cost Segregation $1,564,920

Percent Reclassed:   38%

Tax benefit assuming 37% tax rate:  $562,316

CSSI Fee:   $6150

R.O.I.  $91:1