R&D Facility Cost Segregation Case Study

Maximize Your R&D Facility 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.

R&D Facility
For research and development (R&D) facilities, this approach can provide significant benefits, much like it does for manufacturing facilities or indoor growing operations. R&D facilities often feature specialized equipment, unique infrastructure, and custom-built environments that qualify for accelerated depreciation, allowing owners to lower their tax burden and improve cash flow. The following case study illustrates the benefits of accelerated depreciation, showing how similar advantages can be gained for specialized facilities like R&D centers.

Practical Example

The following case study highlights the benefits of accelerated depreciation, demonstrating how similar advantages can be realized for R&D facilities with specialized infrastructure and cutting-edge research equipment. By optimizing the depreciation life of the facility and its assets for tax efficiency, these strategies can help reduce taxable income, increase cash flow, and improve overall financial performance for R&D facility owners and operators.

Building information

○ Building Type 🡪 R&D Facility
○ Property Type: 🡪 Commercial
○ Building Size: 🡪 3,976 SF
○ Study Scope: 🡪 Acquisition
○ Condition: 🡪 Good
○ Filling Year: 🡪 2023
○ Date Placed in Service: 🡪 2018
○ Purchase Price less Land or Total Construction Cost: 🡪 $2,495,000
○ Tax Rate: 🡪 30%
○ Return on Investment Factor: 🡪 8%

Summary of Benefits

○ 25% Additional Tax Deductions in First Year: 🡪 $1,075,821

○ RNPV Over Remaining Life of Property: 🡪 $287,310

○ Net Present Value (NPV) Over 10 Years: 🡪 $313,902

Building Allocation After Study

5 Year Property

Depreciable Basis: $230,184 at 9%

7 Year Property

Depreciable Basis: $188,332 at 8%

15 Year Property

Depreciable Basis: $253,856 at 10%

39 Year Property

Depreciable Basis: $1,822,628 at 73%

Total

Depreciable Basis: $2,495,000 at 100%

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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Cost Segregation Case Study – R&D Facility