Gas Station Cost Segregation Case Study

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    • Jan 22, 2025
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Maximize Your Gas Stations 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. Gas Station Cost Segregation

Gas Station With Convenience Store
For gas stations with convenience stores, this strategy can be particularly beneficial, as many elements of the property—such as the building itself, signage, and retail fixtures, can be categorized as personal property eligible for accelerated depreciation. Like car washes, where the structure often functions as equipment, gas stations and convenience stores feature numerous removable and decorative items that can be depreciated more quickly, providing substantial tax savings for the business owner.  Gas Station Cost Segregation

Practical Example

The following case study highlights the benefits of accelerated depreciation, demonstrating how similar advantages can be realized for gas stations with specialized infrastructure and customer-oriented services. By optimizing the gas station depreciation life for tax efficiency, these strategies can help reduce taxable income, improve cash flow, and enhance overall financial performance for gas station owners and operators.

Building information

○ Building Type 🡪 Gas Station with Convenience Store
○ Property Type: 🡪 Commercial
○ Building Size: 🡪 7,054 SF
○ Study Scope: 🡪 New Build
○ Condition: 🡪 New
○ Filling Year: 🡪 2023
○ Date Placed in Service: 🡪 2023
○ Purchase Price less Land or Total Construction Cost: 🡪 $3,000,000
○ Tax Rate: 🡪 30%
○ Return on Investment Factor: 🡪 8%

Summary of Benefits

○ 25% Additional Tax Deductions in First Year: 🡪 $2,108,468

○ RNPV Over Remaining Life of Property: 🡪 $547,378

○ Net Present Value (NPV) Over 10 Years: 🡪 $618,088

Building Allocation After Study

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    5 Year Property

    Depreciable Basis: $708,107 at 24%

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    7 Year Property

    Depreciable Basis: $579,360 at 19%

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    15 Year Property

    Depreciable Basis: $713,367 at 24%

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    39 Year Property

    Depreciable Basis: $999,167 at 33%

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    Total

    Depreciable Basis: $3,000,000 at 100%

Sales Tax Exemptions

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