Study Overview
This case study examines a coffee shop acquired in June 2025 for $1,910,000 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 $113,992 in savings.
|
Property Type |
Coffee Shop |
|
First-Year Tax Savings |
$113,992 |
|
Date Placed In-Service |
June 2025 |
|
Tax year study applied |
2025 |
|
Bonus depreciation |
100% |
|
Purchase price(less land) |
$1,910,000 |
|
Accelerated Method |
$334,653 |
|
Straight-Line Method |
$26,568 |
|
Increased Deduction |
$308,085 |
|
Tax Rate |
37% |
Project Overview
A coffee shop owner completed a CSSI cost segregation study, identifying assets eligible for accelerated depreciation. Through a detailed engineering analysis, a significant portion of building costs were reclassified from a 39-year depreciation schedule to much shorter recovery periods, putting money back in the owner’s pocket sooner.
Study Results
The detailed engineering analysis successfully reclassified 35% of the total building costs into accelerated depreciation categories:
*Also refer to “Building Allocation After Study” Graph Below
Key Reclassified Assets
5-Year Property ($305,600) included:
- Espresso machines, brewers, and grinders
- Refrigeration and under-counter cooling units
- Point-of-sale systems, registers, and related wiring
- Movable seating, tables, and millwork not permanently attached to the structure
- Interior signage, décor, and specialty lighting tied to equipment
- Security and audio/visual systems
15-Year Land Improvements ($362,900) included:
- Parking lot paving, striping, and curbing
- Sidewalks and walkways
- Site and parking lot lighting
- Landscaping and irrigation systems
- Fencing and exterior signage on monument or pole bases
- Drive-through lane paving (the pavement itself, separate from any building structure)
Building Allocation After Study
5-Year
$305,600 Re-allocated
15-Year
$362,900 Re-allocated
39-Year
$1,241,500 Re-allocated
Financial Impact
By accelerating depreciation on $1.9-million of the property’s cost basis, the study generated substantial first-year tax deductions and meaningfully improved cash flow. Through the identification of personal property and land improvements, the owner was able to take advantage of:
- 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 also included thorough documentation of the property’s building systems, a valuable resource for making informed capitalize-vs.-expense decisions in line with IRS Tangible Property Regulations. This documentation gives property owners:
- 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 illustrates how liquor store owners can unlock meaningful tax savings through a properly executed cost segregation study. By identifying and reclassifying nearly $1.9-million in assets eligible for accelerated depreciation, the property owner captured significant first-year tax benefits, all while remaining fully compliant with IRS guidelines.
Ready to discover your property’s tax savings potential? Contact CSSI today.
