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Auto Shop Cost Segregation Case Study

Cost segregation is an advanced tax strategy that helps property owners accelerate depreciation, reduce taxable income, and improve cash flow. This case study illustrates the advantages of performing a cost segregation study for an Auto Shop.

Overview

Property Details

  • Property Type: Auto Shop
  • Purchase Price (less land): $1,020,725
  • Building Size: 4,750 square feet
  • Acquisition Date: 2020

Objective

The goal of this study was to reclassify property components into shorter depreciation schedules to maximize tax savings and improve cash flow for the client.

Methodology

  The study involved:

  • Property Review: Conducting a detailed analysis of the building’s components and associated site improvements.
  • Document Examination: Reviewing architectural plans, construction documents, and financial records.
  • Asset Categorization: Identifying assets eligible for shorter recovery periods according to IRS guidelines.
  • Depreciation Analysis: Calculating depreciation deductions based on IRS-compliant methodologies.

Asset Allocation Breakdown

5-Year Class Life Assets

  • Allocated Cost: $96,213 
  • Depreciation Method: 200% Declining Balance
  • Description: Personal property assets, including certain equipment and technology systems.


7-Year Class Life Assets

  • Allocated Cost: $16,083
  • Depreciation Method: 200% Declining Balance
  • Description: Office furniture, fixtures, and equipment.


15-Year Class Life Assets

  • Allocated Cost: $444,705
  • Depreciation Method: 150% Declining Balance
  • Description: Land improvements, such as landscaping, driveways, and outdoor lighting.


39-Year Class Life Assets 

  • Allocated Cost: $463,724
  • Depreciation Method: Straight Line
  • Description: Building structure and systems, including the foundation, walls, roof, HVAC systems, plumbing, and electrical systems.

Key Takeaways

This cost segregation study reclassified approximately 55% of the property’s total basis into shorter depreciation periods. The resulting tax benefits significantly improved cash flow and provided substantial long-term financial advantages for the property owner.

(530) 750-0211

info@ttsgllc.com

(530) 750-0211

Contact Us

info@ttsgllc.com

(530) 750-0211

Get in touch today to explore customized tax solutions for your business or clients.

info@ttsgllc.com

info@ttsgllc.com

info@ttsgllc.com

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