Real Estate Tax Incentives: Cost Segregation Studies Help Uncover Tax Credits

Real Estate Tax Incentives are out there for businesses, but many companies are unaware of how they can take advantage of them. PayPros, Inc., working with Paradigm Partner, helps companies uncover hidden tax credits with our Tax Incentive Services. One method used to find these tax breaks is the use of a Cost Segregation Study.

real estate tax incentive

What is Cost Segregation?

Cost Segregation is an engineering-based analysis of the components of a commercial property with the goal of identifying and segregating personal property from real property. The reclassification to personal property assets results in shorter depreciation lives for those assets and the tax benefits of accelerated depreciation and reduced tax liabilities.

Which Commercial Properties Qualify?

Here is a list of property types that qualify:

  • Assisted Living
  • Apartment Buildings
  • Automobile Dealerships
  • Bank/Financial Institution
  • Fitness/Health Clubs
  • Golf/Resorts Heavy
  • Manufacturing/Processing
  • Hospital/Medical Office Buildings
  • Hotels and Motels
  • Light Manufacturing
  • Office Buildings
  • Restaurants (single or multiple)
  • Self Storage Facilities
  • Strip or Regional Malls
  • Tenant Improvements Warehouses
  • Candidates for Cost Segregation include the following:

  • New Construction
  • Look Back
  • New Acquisition (Purchase Price Allocations)
  • Leasehold Improvements
  • Commercial property that is valued at a minimum of $1,500,000 (excluding land value) or a commercial property with leasehold improvements greater than $750,000 have enough potential benefits to warrant a study.

    What are the Benefits?

  • Time Value of Money
  • Dramatic reduction in taxable income
  • Increased cash flow for investment opportunities and business expansion
  • Property tax savings
  • Insurance savings
  • Sample Case Studies:

    Facility Cost 1st Year Savings 1st Year Tax %Cap Costs 1st 5 Years Tax Savings 1st 5 Years %Cap Costs
    Apartments $6.7M $345,000 5.1% $846,000 12.6%
    Retail $1.5M $96,000 6.4% $165,000 11%
    Restaurants $2.4M $135,000 5.6% $322,000 13.4%
    Warehouses $9.4M $365,000 3.9% $783,000 8.3%


    For a Cost Free Analysis contact David Keenan (888) 693-4611 (direct line), or fill out the form below:

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    For a Cost Free Analysis contact David Keenan (888) 693-4611 (direct line), or fill out the Contact form at the bottom of the page.