Cost Segregation: Multi-Family Case Study
Mar 12, 2021 Investors benefit from 100% Bonus Depreciation. The Cost Seg America team was engaged to conduct its “fully engineered and accounted” cost segregation study on this multifamily property, so the investors can benefit from 100% bonus depreciation.
WITHOUT COST SEGREGATION BENEFITS
Assuming straight-line depreciation, this project would provide $890,182 per year in deductions over the next 27.5 years. That is helpful but will not mitigate much tax liability.
USING COST SEGREGATION AS A TAX STRATEGY
Cost Segregation is a method of reclassifying certain building components into a shorter life-class. This study reclassified $10,330,374 in short-life assets. With 100% bonus depreciation, this can all be taken in the first year.
Net Cash Benefit of this study is $3,822,238 (assuming a 37% tax bracket).
That’s real money that can be invested in more real estate properties to help simulate the economy.
| ADJUSTED ASSET CLASS LIFE | % Re-classified | $ Amount |
| Accelerated Depreciation (5, 7 & 15 year) | 37% | $10,330,374.08 |
| 27.5 year property | 63% | $17,209,625.92 |
| Total Property Depreciation Basis | 100% | $27,540,000.00 |
Having forensic fixed asset management detail for all property components allows for future expenses in the future. This happens through the retirement and disposition of assets through property renovations, repairs, and maintenance.
EXPERIENCE AND METHODOLOGY MATTER
Since 2002, the Cost Seg America team has led the industry with the most forensic cost segregation studies in the industry. Our proprietary engineering approach provides complete asset detail, while other firms use a residual, sampling or modelling approach. These approaches are far less engineered and leave your money on the table. Our unique methodology and attention to detail maximizes tax benefits and delivers a bulletproof study in the event of an IRS audit.
Contact us today if you can benefit from cost segregation on your property.
Contact us to see if COST SEGREGATION is a good fit for your business.
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