Cost Seg on a Multi-Family Acquisition
A client acquired an Arizona apartment community for $2,500,000 in 2021. Using a land allocation (the raw land is not depreciable) of $500,000, the depreciation basis is $2,000,000. If using the 27.5-year straight-line depreciation, the tax deduction would be $72,727 per year. However, our client decided to engage the Cost Seg America team to perform a cost segregation study.
The Cost Seg America team was able to identify $1,058,916.30 of the asset costs to be reclassified over 5, 7 and 15 years (53% of the depreciable basis). By utilizing this study and electing 100% Bonus Depreciation, our client has gone from a $72,727 deduction in year one, to $1,058,916.30 deduction in year one.
This contrast is substantial and afforded the client to opportunity to purchase another investment property. |