When investing in new construction, property owners face a major challenge: how to maximize returns while balancing the significant upfront capital costs. Cost segregation studies (CSS) are a powerful tool that allows owners to accelerate depreciation, reduce tax liability, and free up cash flow for reinvestment.
We’ve highlighted three real-life examples that demonstrate how engineering-based cost segregation creates substantial tax savings and long-term financial advantages.
Accelerating ROI on Storage Facility Developments
A development firm reached out to our team to perform a cost segregation study on an $11.5 million new build storage facility in New York. The goal was to identify assets that could be shifted into shorter recovery periods to accelerate depreciation and defer taxes.
The Cost Segregation Process
The CSS team got to work reviewing the design and construction documents, contractor payment requisitions, and other data to establish cost bases.
The next step was to have our engineer conduct an on-site study. This was where they found and photographed all assets that may qualify for accelerated depreciation. These included:
- Flooring and specialized lighting
- Security and surveillance systems
- Fencing and retaining walls
- Roll-up storage unit doors
Our on-site engineer then collaborated with our costing engineer and tax specialist to identify assets that qualify as “specialized use," or those outside the normal use of the property.
The Results
Our team yielded amazing results for our new construction client. Our study identified over $3.36 million in assets eligible for shorter recovery periods, resulting in over $976,000 in projected first-year tax savings.
For storage facilities, cost segregation transforms a significant upfront capital investment into immediate tax benefits and stronger cash flow, rather than being locked up in decades-long depreciation.
Creating Tax Efficiency in Restaurant Projects
A new construction client reached out to our team about a $2.2 million restaurant development to identify assets that could be moved to shorter recovery periods, accelerate depreciation, and defer taxes.
The Cost Segregation Process
Our tax and technical team reviewed all design and construction documents, contractor payment requisitions, and other data to help determine the cost basis for all project-related hard and soft costs.
Next, our cost segregation engineer conducted an on-site study to identify and photograph all assets often accelerated in restaurant construction, including:
- Kitchen equipment and dedicated electrical/plumbing
- Outdoor signage and parking lots
- Ventilation and exhaust systems
- Cold storage and freezer panels
Our engineer, costing engineer, and tax specialist then categorized specialized-use assets to further optimize deductions.
The Results
The CSS team accelerated 39% of assets into 5-year property and 9% into 15-year property to shorter recovery periods, producing $245,896 in first-year tax savings.
For restaurants, cost segregation turns large capital investments into near-term tax savings, strengthens cash flow, and helps operators scale faster in a competitive, high-expense industry.
Driving Investor Returns in Multi-Family Construction
A development firm partnered with us to perform a cost segregation study on a phase 1 and 2 $23 million multi-family complex. Our job was to uncover assets that could be moved to shorter recovery periods to accelerate depreciation and defer taxes.
The Cost Segregation Process
Our engineers started by analyzing construction documents, requisitions, and design data. On-site, our engineer identified and photographed all assets eligible for accelerated depreciation, such as:
- Appliances and specialty HVAC systems
- Security systems and telecommunications wiring
- Landscaping and outdoor lighting
- Cabinetry and countertops
The costing engineer and tax specialist then validated “specialized use” assets to maximize tax savings.
The Results
The client saw impressive results. Through our cost segregation study, we accelerated over $6.5 million in assets, resulting in over $1.1 million projected tax savings in year one.
Cost segregation for multi-family projects provides immediate deductions, early-stage cash flow, and more investor-friendly returns, which are key advantages in today’s housing market.
Turning New Builds into Immediate Gains
New construction projects represent long-term investments, but with cost segregation, owners don’t have to wait decades to see returns. By accelerating depreciation, property owners unlock upfront tax savings, strengthen cash flow, and create flexibility for growth.
Why Work with NetTax?
At NetTax, in partnership with Empower Solutions, we deliver expert engineering-based cost segregation studies tailored to your industry. Whether you’re building a storage facility, restaurant, or multi-family complex, our proven process identifies opportunities for accelerated depreciation and maximized tax savings.
Reach out to our team today and let’s get started.