Client Background
The owner of a mixed-use commercial property with six commercial units and three residential apartments wanted to maximize tax savings using a cost segregation study. The property was a major investment, and the owner sought ways to accelerate depreciation and reduce tax liabilities. The client hired Development Theory to do a cost segregation study for a commercial property.
The Challenge
Limited Understanding of Depreciation Benefits: The owner was unaware of how cost segregation could reduce tax burdens.
High Tax Liabilities: The property generated significant rental income, leading to high taxable income.
Complex Property Structure: The mix of commercial and residential spaces required detailed asset classification.
Need for Retroactive Tax Savings: The owner wanted to apply cost segregation to past tax years to reclaim overpaid taxes.
Our Approach
Property Component Breakdown: Identified assets that could be depreciated over 5, 7, and 15 years instead of the standard 39-year schedule.
Tax Savings Analysis: Estimated potential tax reductions based on accelerated depreciation.
Engineering-Based Cost Segregation Study: Conducted a detailed review of building components, electrical, HVAC, and interior improvements.
IRS Compliance & Filing Support: Ensured the owner could retroactively apply depreciation adjustments to previous tax returns.
Future Tax Planning Strategy: Provided recommendations for ongoing real estate tax efficiency.
The Solution
Accelerated depreciation on 40% of the property’s assets, reducing taxable income.
Helped the owner claim $250,000 in tax deductions over five years.
Structured a retroactive tax adjustment, allowing for refunds on past overpaid taxes.
Provided a long-term tax savings strategy, ensuring continued financial benefits.
Results & Impact
Saved $22,000 in taxes over two years, improving cash flow.
Recovered past overpayments, providing an immediate financial boost.
Optimized property depreciation, maximizing long-term tax efficiency.
Increased net profits, allowing reinvestment into additional real estate holdings.
Client Feedback
"I had no idea I was leaving so much money on the table. The cost segregation study not only saved me thousands in taxes but also helped me structure my real estate investments more strategically."
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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