By recovering costs over a shorter period of time, property owners can enjoy tax savings. A Cost Segregation Study (CSS) allocates the total building cost between real property (27.5 - 39-year life), personal property (5 - 7-year life), and land improvements (15-year life).

The example below presumes an office building purchased or newly constructed for $5,000,000, excluding land.

Case Studies
Straight-line annual depreciation ($5,000,000 39 years) before CSS
Due to the mid-month convention, this figure times 5 does not equal to the
5-year total below.
$128,205
Depreciation deductions for the first 5 years without CSS $635,684
CSS reclassifies 16% of the total cost as 5-year personal property and 8% as 15-year land improvements  
Annual depreciation deduction for $1,200,000 ($5,000,000 x 24%) personal properties and land improvements depreciated over 5 and 15 years during the first 5 years $904,602
Annual depreciation deduction for $3,800,000 ($5,000,000 x 76%) real property depreciated over 39 years during the first 5 years $483,120
Depreciation deductions for the first 5 years with CSS $1,387,722
   
Five years with CSS $1,387,722
Five years without CSS (39-year straight-line) $635,684
Additional depreciation deduction after CSS over 5 years $752,038
Tax savings over 5 years assuming a 35% Federal tax rate » $263,213
Case Studies
Type of Building: Medical Suites / Cost: $1,140,000
Situation: New Construction/Purchase
5-year property: 21%
15-year property: 24%
39-year property: 55%
Estimated 5-Year Cash Savings: $95,270
Estimated 10-Year Net Present Value (NPV) of Deferred Taxes: $95,960
Type of Building: Self-Storage Facility / Cost: $4,427,000
Situation: New Construction
5-year property: 18%
15-year property: 15%
39-year property: 67%
Estimated 5-Year Cash Savings: $301,700
Estimated 10-Year NPV of Deferred Taxes: $301,000
Type of Building: Professional Building / Cost: $1,737,000
Situation: Step-Up and Look-Back
5-year property: 21%
15-year property: 4%
39-year property: 75%
Estimated 5-Year Cash Savings: $115,800
Estimated 10-Year NPV of Deferred Taxes: $98,000
Type of Building: Shopping Center / Cost: $1,784,000
Situation: Step-Up and Look-Back
5-year property: 17%
15-year property: 5%
39-year property: 78%
Estimated 5-Year Cash Savings: $96,700
Estimated 10-Year NPV of Deferred Taxes: $92,000
Type of Building: Hotel / Cost: $11,222,000
Situation: New Construction
5-year property: 14%
15-year property: 14%
39-year property: 72%
Estimated 5-Year Cash Savings: $593,000
Estimated 10-Year NPV of Deferred Taxes: $588,000
Type of Building: Mixed-Use / Cost: $45,000,000
Situation: New Construction
5-year property: 9%
15-year property: 2%
27.5/39-year property: 89%
Estimated 5-Year Cash Savings: $1,059,000
Estimated 10-Year NPV of Deferred Taxes: $883,000

Complimentary Feasibility Analysis

Our comprehensive feasibility analysis report includes an estimate of the likely tax savings and cash benefits derived from a Cost Segregation Study to assist you in making a sound decision.


Quality Cost Segregation Group is a member of:

CCIM San Antonio / South Texas Chapter - Affiliate Member

Quality Cost Segregation Group, LLC

P.O. Box 160426
San Antonio, TX 78280
210.561.1200

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