Self Storage Cost Segregation Case Study

Maximize Your Self Storage Building’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.

Self Storage
Although self-storage properties may seem straightforward, they can benefit from cost segregation by identifying components like paving, fencing, security systems, and climate control features. By accelerating depreciation on these assets, owners can reduce taxable income more quickly, improving cash flow and financial performance. This strategy helps maximize tax savings and enhances the long-term profitability of self-storage investments, providing capital for reinvestment in the business.

Practical Example

This case study highlights the benefits of accelerated depreciation, showing how self-storage facilities with specialized infrastructure can optimize depreciation for tax efficiency, reduce taxable income, and improve cash flow, ultimately boosting financial performance.

Building information

○ Building Type 🡪 Self Storage
○ Property Type: 🡪 Commercial
○ Building Size: 🡪 328,465 SF
○ Study Scope: 🡪 New Build
○ Condition: 🡪 New
○ Filling Year: 🡪 2023
○ Date Placed in Service: 🡪 2018
○ Purchase Price less Land or Total Construction Cost: 🡪 $2,000,000
○ Tax Rate: 🡪 30%
○ Return on Investment Factor: 🡪 8%

Summary of Benefits

○ 25% Additional Tax Deductions in First Year: 🡪 $580,632

○ RNPV Over Remaining Life of Property: 🡪 $169,637

○ Net Present Value (NPV) Over 10 Years: 🡪 $178,006

Building Allocation After Study

5 Year Property

Depreciable Basis: $15,070 at 0.75%

7 Year Property

Depreciable Basis: $12,330 at 0.62%

15 Year Property

Depreciable Basis: $295,350 at 14.77%

39 Year Property

Depreciable Basis: $1,677,250 at 83.86%

Total

Depreciable Basis: $2,000,000 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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Self Storage Cost Segregation