Client Background
A luxury hotel with a conference center needed a cost segregation study to maximize tax deductions after completing a $6.5 million renovation. The client hired Development Theory to do a cost segregation study for a hotel and conference center.
The Challenge
Long Depreciation Schedule: Without cost segregation, renovations would have been depreciated over 39 years, delaying tax benefits.
High Utility & FF&E Costs: The property included upgraded lighting, HVAC systems, and furniture, which could be reclassified.
Significant Cash Flow Pressures: The hotel needed immediate tax savings to offset renovation expenses.
Our Approach
Capital Improvement Cost Breakdown: Identified qualified assets (fixtures, furniture, and specialized electrical systems) eligible for accelerated depreciation.
Reclassification of Building Components: Shifted $3.2 million of assets into 5-, 7-, and 15-year depreciation categories.
Energy Efficiency Tax Benefits: Applied 179D energy tax deductions for energy-efficient upgrades.
Bonus Depreciation & Tax Strategy: Maximized first-year bonus depreciation for newly installed assets.
Financial Forecasting for Future Renovations: Created a multi-year tax strategy to optimize deductions over time.
The Solution
Reallocated $3.2 million of renovation costs into accelerated depreciation schedules.
Applied bonus depreciation, reducing taxable income immediately.
Captured energy efficiency tax incentives, lowering overall project costs.
Results & Impact
Saved $1.3 million in first-year tax deductions, improving cash flow.
Annual tax liability reduced, allowing reinvestment in guest experience upgrades.
Hotel owners reinvested tax savings into marketing and staff training, increasing occupancy rates.
Long-term depreciation benefits ensured continuous savings.
Client Feedback
"We were able to recover renovation costs faster than expected, giving us more financial flexibility. This strategy was a game-changer for our business!"
Development Theory Can Help Business Owners Like You
Are you leaving money on the table with slow depreciation? A Cost Segregation Study can accelerate your tax deductions, improve cash flow, and free up capital to reinvest in your business. Whether you own commercial real estate, a rental property, or a specialty facility, our team at Development Theory helps business owners maximize tax savings while staying IRS-compliant. The best time to conduct a study is within the first few years of property ownership or after major renovations—don’t wait to take advantage of these savings.
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