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Case Study

$4.5 Million Immediate Deduction: Cost Segregation on a Mixed-Use Acquisition

Accelerating Depreciation on a $15 Million Commercial Property for Massive First-Year Cash Flow

The Challenge: Slow Depreciation Drag (Est. 400 words)

A commercial real estate investment firm that purchased a $15 Million mixed-use property (retail and office space).

The Problem

The client’s initial internal projection, based on standard straight-line depreciation, was to depreciate the property's structure (approximately $12 Million of the cost basis) over 39 years. This slow depreciation would yield an annual non-cash deduction of only $307,692. While this reduced taxable income, it was far too slow to provide the aggressive tax savings needed to offset the client’s high operating income from their other successful ventures. The client was facing a large tax liability in the current year

The Catastrophe Avoided

Relying on the standard 39-year schedule meant leaving millions of dollars in accelerated deductions—and hundreds of thousands in immediate cash flow—on the table, which would have been paid to the IRS instead of being reinvested.

Our Mandate

Perform an engineering-based Cost Segregation Study to maximize the reclassification of property components into shorter recovery periods (5, 7, and 15 years), leveraging current Bonus Depreciation rules for maximum first-year deduction

The Taxezz Solution: Engineering Study and Asset Reclassification

Our team worked with a specialized engineer to conduct a rigorous, site-visit-based Cost
Segregation Study, adhering to the highest IRS standards

The Result: $1.5 Million Immediate Cash Flow

The successful Cost Segregation Study provided the client with unparalleled first-year tax savings and cash flow.

Total Taxable Income Offset

The $3.8 Million first-year deduction allowed the client to immediately offset taxable income from this asset and other profitable ventures.

Cash Flow Impact

For a firm subject to a combined corporate and individual tax rate of 40%, the accelerated deduction generated a direct tax savings of approximately $1,526,000 in the year the study was completed

ROI

The tax savings generated exceeded the cost of the engineering study by a factor of 50x, providing an enormous and immediate return on investment.

The Taxezz plan didn't just save us money; it saved the business. We now have a clear succession path, and we know that decades of work won't be wiped out by a tax bill

– Successor Generation Principal

Conclusion:
Stop Depreciating Slowly

If you own a commercial, multi-family, or specialty-use property worth over $500,000, the slow 39-year depreciation schedule is draining your cash flow. A professional, engineering-based Cost Segregation Study is the single best way to maximize your current year deductions and put millions back into your investment strategy .

Want to accelerate your cash flow? Let’s analyze your property for a Cost Segregation Study.

Request a Free Cost Segregation Feasibility Analysis