From large manufacturers to small medical offices, cost segregation is helping businesses across industries uncover valuable tax savings and boost cash flow. Here’s how engineering-based studies make it happen and why NetTax and our alliance partner, Empower Solutions, are the partners you want by your side.
Engineering-based cost segregation, a tax strategy that identifies and reclassifies components of a building, reduces real estate owners’ tax liability and increases cash flow. Rather than relying on broad estimates, these studies examine each facility in detail, down to electrical, mechanical, and specialty systems, making them highly accurate and IRS-compliant.
Industries of all sizes and types can benefit, especially those with capital-intensive properties. Let’s break down how we’ve helped deliver meaningful results in three distinct sectors.
In 2019, our team was contacted by a CPA client to help their manufacturing client increase revenue and pay less tax. Our remedy? Applying one of our core competencies: cost segregation study (CSS).
The tax and technical team got to work, starting with examining all design and construction documents, contractor payment requisitions, and determining the cost basis for all hard and soft costs. Next, we brought in our engineer. During their on-site study, they identified and photographed all assets that qualify for accelerated depreciation. This was where assets that qualify as “specialized use”, or outside normal use of that property, were identified.
The manufacturing client saw amazing results. The CSS team identified over $4.3 million in additional depreciation, resulting in over $1.5 million in deferred taxes in the first year.
Manufacturing facilities often have a large volume of specialized equipment and improvements that qualify for shorter depreciation timelines, making them ideal candidates for cost segregation.
When a CPA firm reached out to our team regarding several senior living healthcare facilities, we geared up. We were tasked with helping these facilities improve cash flow, increase revenue, and pay less tax.
Our tax and technical team started by examining important documents, contractor payment requisitions, and the project’s hard and soft costs. Then our cost segregation engineer went on-site to document all assets that qualify for accelerated depreciation, including nursing home-specific assets like ADA-compliant features, resident room furnishings, and more. The report was then received by our team before release.
The CSS team accelerated over $800,000 of one facility’s assets to shorter recovery periods, resulting in the property owner’s tax savings of $300,000 for the first year.
Healthcare facilities contain many qualifying assets that may go unnoticed without expert analysis, resulting in major missed tax opportunities.
A CPA partner came to us wanting a cost segregation analysis on the acquisition of a 10,160 sq ft. dental office and subsequent improvements on the property. The goal of the study was to identify assets that could be moved to shorter recovery periods to accelerate depreciation and defer taxes.
Our tax and technical team had an important task ahead of them and dove right in. They began with examining all design and construction documents, data for all hard and soft costs, and contractor payment requisitions.
The next step began with our engineer going on-site to identify and photograph all assets that qualify for accelerated depreciation. For dental offices, this can include dental chairs, x-ray machines, and other dental-related assets, as well as parking lots, roofing systems, and HVACs. Then, our site engineer, costing engineer, and tax specialist identified every asset that qualifies as “specialized use.”
The conducted cost segregation study identified and accelerated $850,960 of assets to shorter recovery periods of 15-year and 5-year property. This resulted in the property owner’s tax savings projected to be $320,826 for the first tax year.
Even relatively small professional buildings can yield six-figure tax benefits through cost segregation when dental or specialty-use assets are reclassified appropriately.
With our expertise in various industries, proven ROI, and expert-guided process, NetTax and Empower Solutions can help you keep more of your money and stay IRS-compliant. Whether you manage a single facility or a portfolio of properties, our team uncovers the full value of your building investment efficiently and accurately.
Reach out to us today and discover how much you could be saving.