Heavy Manufacturing Facilities Cost Segregation Case Study

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    • Jan 24, 2025
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Maximize Your Heavy Manufacturing Facilities Tax Strategy

What is Cost Segregation
Cost segregation is an effective tax planning strategy that helps businesses and individuals involved in constructing, purchasing, expanding, or renovating real estate reduce their tax liabilities by accelerating depreciation deductions, which allows for the deferral of both federal and state income taxes.

Heavy Manufacturing Facilities
Heavy manufacturing facilities often rely on advanced, high-tech equipment, making them ideal candidates for cost segregation. This strategy allows owners to separate assets like machinery, production lines, and specialized systems, qualifying them for accelerated depreciation. By doing so, owners can reduce taxable income, improve cash flow, and free up capital for reinvestment. Ultimately, cost segregation helps optimize tax positions, enhance financial performance, and increase long-term profitability.

Cost Segregation for Heavy Manufacturing 

This case study highlights the benefits of accelerated depreciation for manufacturing facilities, showing how optimizing depreciation on equipment and machinery can reduce taxable income, improve cash flow, and boost profitability.

Building information

○ Building Type 🡪 Heavy Manufacturing
○ Property Type: 🡪 Commercial
○ Building Size: 🡪 524,298 SF
○ Study Scope: 🡪 Acquisition
○ Condition: 🡪 Good
○ Filling Year: 🡪 2023
○ Date Placed in Service: 🡪 2018
○ Purchase Price less Land or Total Construction Cost: 🡪 $62,500,000
○ Tax Rate: 🡪 30%
○ Return on Investment Factor: 🡪 8%

Summary of Benefits

○ 25% Additional Tax Deductions in First Year: 🡪 $40,035,373

○ RNPV Over Remaining Life of Property: 🡪 $10,319,017

○ Net Present Value (NPV) Over 10 Years: 🡪 $11,588,414

Building Allocation After Study

  • precision_manufacturing
    5 Year Property

    Depreciable Basis: $20,205,281 at 32%

  • precision_manufacturing
    7 Year Property

    Depreciable Basis: $6,735,094 at 11%

  • precision_manufacturing
    15 Year Property

    Depreciable Basis: $5,156,250 at 8%

  • precision_manufacturing
    39 Year Property

    Depreciable Basis: $30,403,375 at 49%

  • currency_exchange
    Total

    Depreciable Basis: $62,500,000 at 100%

Sales Tax Exemptions

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