Cost Segregation Case Study – Light Manufacturing   

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    • Jan 24, 2025
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Maximize Your Light Manufacturing Faclities 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.

Light Manufacturing
For light manufacturing facilities, by accelerating depreciation deductions, this approach helps lower tax liabilities and allows for the deferral of federal and state income taxes, resulting in improved cash flow. Light manufacturing facilities, often characterized by their specialized equipment and flexible layouts, are particularly well-suited for cost segregation. By optimizing their tax positions through this strategy, owners can maximize the financial benefits of their investments and enhance overall profitability. 

Practical Example

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 🡪 Light Manufacturing
○ Property Type: 🡪 Commercial
○ Building Size: 🡪 64,413 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: 🡪 $21,563,393

○ RNPV Over Remaining Life of Property: 🡪 $5,912,221
○ Net Present Value (NPV) Over 10 Years: 🡪 $6,330,049

Building Allocation After Study

  • precision_manufacturing
    5 Year Property

    Depreciable Basis: $4,062,500 at 7%

  • precision_manufacturing
    7 Year Property

    Depreciable Basis: $2,187,500 at 4%

  • precision_manufacturing
    15 Year Property

    Depreciable Basis: $4,314,750 at 7%

  • precision_manufacturing
    39 Year Property

    Depreciable Basis: $51,935,250 at 83%

  • currency_exchange
    Total

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

Sales Tax Exemptions

At Leyton USA

We help companies unlock millions in funding through R&D tax credits, energy incentives, state, and local tax programs. Our experts partner with finance and executive teams to identify overlooked opportunities, improve cash flow, optimize tax positions to reinvest savings into innovation and sustainable growth.

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