Cost Segregation Case Study – Casino

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    • Jan 23, 2025
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Maximize Your Casino’s 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.

Casino
Cold storage facilities are particularly well-suited for cost segregation due to the specialized nature of their infrastructure, such as high-power refrigeration systems, HVAC, and plumbing. These properties are often highlighted in case law and audit techniques guides as hallmark examples of where cost segregation can be especially beneficial. Components like ATM systems or slot machines, for example, with their own dedicated power supplies, can also be depreciated over shorter periods. This approach allows cold storage owners to leverage the full potential of tax savings while optimizing the financial benefits of their investments. 

Practical Example

The following case study highlights the benefits of accelerated depreciation, demonstrating how similar advantages can be realized for casinos with intricate infrastructure and guest-focused amenities. By optimizing the depreciation life of the casino and its assets for tax efficiency, these strategies can help reduce taxable income, improve cash flow, and enhance overall financial performance for casino owners and operators.

Building information

○ Building Type 🡪 Casino
○ Property Type: 🡪 Commercial
○ Building Size: 🡪 187,500 SF
○ Study Scope: 🡪 Acquisition
○ Condition: 🡪 New
○ Filling Year: 🡪 2023
○ Date Placed in Service: 🡪 2018
○ Purchase Price less Land or Total Construction Cost: 🡪 $20,000,000
○ Tax Rate: 🡪 30%
○ Return on Investment Factor: 🡪 8%

Summary of Benefits

○ 25% Additional Tax Deductions in First Year: 🡪 $9,247,738

○ RNPV Over Remaining Life of Property: 🡪 $2,573,180

○ Net Present Value (NPV) Over 10 Years: 🡪 $2,724,119

Building Allocation After Study

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    5 Year Property

    Depreciable Basis: $1,791,907 at 9%

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    7 Year Property

    Depreciable Basis: $447,977 at 2%

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    15 Year Property

    Depreciable Basis: $1,576,617 at 8%

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    39 Year Property

    Depreciable Basis: $16,183,499 at 81%

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    Total

    Depreciable Basis: $20,000,000 at 100%

Sales Tax Exemptions

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