Cost Segregation Case Study
With the excellent interest rates and prime real estate opportunities, many business owners have taken the plunge to buy or build a new building. Owning a building helps you significantly reduce income taxes and increases cash flow when you accelerate deductions. We have provided cost segregation studies on buildings to provide substantial tax savings to the owner.
Situation
Our client owns several childcare and educational centers. Before working with us, the company had not taken advantage of the cost segregation study. The client’s average building was 10,587 square feet and cost about $1.8 million dollars to develop.
Response
We reviewed three of the childcare centers, including those acquired as far back as 1987 in order to take advantage of the acceleration depreciation. We conducted a walk-through site visit and examined the blueprints of each building. We also spoke with the owners, CFO and builders to get a better feel for the reasons behind the building and some of its internal structural needs.
Outcome
We segregated 35% of the total building to shorter-lived assets, which resulted in increased cash flow of $185,062 to be realized over the first seven years of project life.