Study Overview
This case study examines a commercial Mixed-Use property acquired in 2025 for $2,189,563 and applied in the 2025 tax year. By also leveraging 100% bonus depreciation, the cost segregation study reclassified eligible building components into shorter recovery periods, maximizing upfront tax savings resulting in $141,798.
|
Property Type |
Mixed-Use |
|
First-Year Tax Savings |
$141,798 |
|
Date Placed In-Service |
Jan. 2025 |
|
Tax year study applied |
2025 |
|
Bonus depreciation |
100% |
|
Purchase price(less land) |
$2,189,563 |
|
Accelerated Method |
$437,122 |
|
Straight-Line Method |
$53,885 |
|
Increased Deduction |
$383,237 |
|
Tax Rate |
37% |
Project Overview
By accelerating depreciation on $2,189,563 of the property’s cost basis, this study generated significant first-year tax deductions and meaningful cash flow improvement. Through the precise identification of personal property and land improvements, the property owner was able to take advantage of:
Study Results
The detailed engineering analysis successfully reclassified nearly 37% of the total building costs into accelerated depreciation categories:
*Also refer to “Building Allocation After Study” Graph Below
Key Reclassified Assets
5-Year Property ($394,121) included:
- Flooring and finishes
- Cabinetry and built-ins
- Appliances and equipment
- Specialty electrical and tech
- Interior specialty items
- Amenity and common area assets
15-Year Land Improvements ($459,808) included:
- Paving and hardscape
- Landscaping and site features
- Exterior lighting and signage
- Fencing and barriers
- Utilities and site infrastructure
- Recreational and amenity structures
Building Allocation After Study
5-Year
$394,121 Re-allocated
15-Year
$459,808 Re-allocated
27.5-Year
$1,335,633 Re-allocated
Financial Impact
By accelerating depreciation on $2,189,563 of the property’s cost basis, this study created substantial first-year tax deductions and improved cash flow. The identification of personal property and land improvements allowed for:
- Immediate bonus depreciation eligibility on qualifying assets
- Accelerated depreciation schedules on shorter-life property
- Enhanced cash flow through reduced tax liability
- Proper cost basis documentation for future disposition analysis
Building Systems Documentation
The study included comprehensive building systems documentation to support future capitalize-versus-expense decisions in accordance with IRS Tangible Property Regulations. This documentation provides:
- Current replacement cost benchmarks for each building system
- Detailed asset inventories by depreciable life
- Support for partial disposition elections on future improvements
- Compliance with IRC Section 1.263(a)-3 requirements
Compliance & Methodology
The study was conducted in full accordance with:
- IRS Revenue Procedure 87-56 asset classification guidelines
- Modified Accelerated Cost Recovery System (MACRS) regulations
- IRC Section 168 property classification standards
- Tangible Property Final Regulations (Treasury Decision 9636)
All asset classifications were supported by site inspection, architectural plans, construction documentation, and established engineering cost analysis standards designed to withstand IRS scrutiny.
Why This Matters
This case study shows how one commercial property owner unlocked substantial tax savings through a detailed cost segregation study. By identifying and reclassifying nearly $2.19 million in assets eligible for accelerated depreciation, combined with 100% bonus depreciation, CSSI delivered immediate cash flow benefits, fully grounded in IRS compliance.
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