Client Background
A real estate investor who owned a 20,000-square-foot commercial office building wanted to maximize depreciation deductions to reduce taxable income and improve cash flow. The client hired Development Theory to do a cost segregation study for an office building.
The Challenge
Limited Depreciation Benefits: The property was being depreciated over a standard 39-year schedule, delaying tax savings.
High Tax Liability: The investor was paying higher-than-necessary taxes due to slow depreciation.
Complex Asset Classification Issues: The property included common areas, tenant improvements, and specialized office features, making it difficult to allocate costs properly.
Our Approach
Detailed Engineering-Based Cost Segregation Study: Conducted a room-by-room property analysis to identify assets eligible for accelerated depreciation.
Reclassification of Building Components: Allocated qualified assets into 5-, 7-, and 15-year depreciation schedules instead of the default 39-year method.
Bonus Depreciation Maximization: Applied 100% bonus depreciation for eligible assets, significantly increasing first-year tax savings.
Tenant Improvement Deduction Strategy: Identified and classified tenant upgrades separately, increasing tax benefits.
IRS-Compliant Report Preparation: Provided detailed documentation supporting the revised depreciation schedule.
The Solution
Accelerated $2.1 million in depreciation into the first five years.
Applied bonus depreciation, reducing taxable income immediately.
Optimized tax savings without triggering audit risks.
Results & Impact
Saved $840,000 in taxes.
Reduced annual taxable income, improving cash flow for reinvestment.
Investor reinvested savings into a second commercial property, growing their portfolio.
IRS-compliant cost segregation report ensured audit protection.
Client Feedback
"I was leaving money on the table by using a standard depreciation schedule. This study will save me almost a million dollars in taxes over the next five years, and helped me expand my real estate holdings!"
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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