Cost Segregation Case Study – Retail General

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    • Jan 22, 2025
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Maximize Your Retail General 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.

Retail General
For retail businesses, this strategy is particularly effective, as nearly all aspects of the property—including removable fixtures, decorative elements, and specialized store equipment—can be depreciated more quickly. Since everything in a retail store is designed for business use, cost segregation provides significant opportunities for tax savings, improving cash flow and maximizing financial efficiency.

Practical Example

The following case study highlights the benefits of accelerated depreciation, demonstrating how similar advantages can be realized for retail stores with complex infrastructure and customer-focused amenities. By optimizing the retail store depreciation life for tax efficiency, these strategies can help reduce taxable income, increase cash flow, and improve overall financial performance for store owners and operators.

Building information

○ Building Type 🡪 Retail General
○ Property Type: 🡪 Commercial
○ Building Size: 🡪 12,515 SF
○ Study Scope: 🡪 Acquisition
○ Condition: 🡪 Good
○ Filling Year: 🡪 2023
○ Date Placed in Service: 🡪 2018
○ Purchase Price less Land or Total Construction Cost: 🡪 $7,400,00
○ Tax Rate: 🡪 30%
○ Return on Investment Factor: 🡪 8%

Summary of Benefits

○ 25% Additional Tax Deductions in First Year: 🡪 $3,868,439

○ RNPV Over Remaining Life of Property: 🡪 $1,140,929

○ Net Present Value (NPV) Over 10 Years: 🡪 $1,081,992

Building Allocation After Study

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    5 Year Property

    Depreciable Basis: $369,479 at 5%

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    7 Year Property

    Depreciable Basis: $302,301 at 4%

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    15 Year Property

    Depreciable Basis: $818,434 at 11%

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    39 Year Property

    Depreciable Basis: $5,909,786 at 80%

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    Total

    Depreciable Basis: $7,400,00 at 100%

Sales Tax Exemptions

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