Cost Segregation Case Study – Warehouses or Industrial Facilities

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    • Jan 14, 2025
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Maximize Your Warehouses or Industrial 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.

Warehouses or Industrial Facilities
While warehouses may not have as many visible assets compared to other sectors, they can still greatly benefit from cost segregation, especially if they house complex manufacturing or distribution operations. By thoroughly identifying and classifying components such as specialized equipment, racking systems, HVAC systems, and distinct building features, property owners can maximize their tax benefits, minimize tax liability, and improve the financial performance of their industrial investments. This strategic approach not only provides immediate tax relief but also contributes to long-term investment growth and overall operational efficiency.

Practical Example

This case study highlights the benefits of accelerated depreciation and demonstrates how similar advantages can be realized for warehouses or industrial facilities with complex infrastructure and specialized systems. By applying this strategy, these facilities can optimize their depreciation schedule, enhancing tax efficiency.

Building information

○ Building Type 🡪 Warehouses and Industrial
○ Property Type: 🡪 Commercial
○ Building Size: 🡪 639,595 SF
○ Study Scope: 🡪 New Build
○ Condition: 🡪 New
○ Filling Year: 🡪 2023
○ Date Placed in Service: 🡪 2023
○ Purchase Price less Land or Total Construction Cost: 🡪 $16,073,600
○ Tax Rate: 🡪 30%
○ Return on Investment Factor: 🡪 8%

Summary of Benefits

○ 25% Additional Tax Deductions in First Year: 🡪 $7,193,284

○ RNPV Over Remaining Life of Property: 🡪 $2,161,743

○ Net Present Value (NPV) Over 10 Years: 🡪 $2,248,612

Building Allocation After Study

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    5 Year Property

    Depreciable Basis: $686,210 at 4%

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    7 Year Property

    Depreciable Basis: $561,444 at 3%

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    15 Year Property

    Depreciable Basis: $2,151,873 at 13%

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    39 Year Property

    Depreciable Basis: $12,674,073 at 79%

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    Total

    Depreciable Basis: $11,650,000 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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