Certified Leasehold Enhancements

Bonus Depreciation Rates for Eligible Enhancements

Explore the attractive bonus depreciation rates provided for various periods:

• QIP Placed from 2018 to 2022: Enjoy 100% bonus depreciation
• Between 2016 and 2017: Avail a generous 50% bonus depreciation rate

Approval for Building Improvements

While studies usually focus on the past 5-7 years, some have examined properties in service since 1987. Depreciation spans 27.5 or 39 years currently. Considering a starting point of $500,000 or more in capitalized costs is wise for Cost Segregation. Eligible properties include those acquired, constructed, expanded, or remodeled. The property owner must be a tax-paying entity. Ideal building types encompass auto dealerships, banks, casinos, distribution centers, grocery stores, health care facilities, hotels, manufacturing facilities, office buildings, restaurants, shopping centers, sports facilities, warehouses, and other specialized properties.

Cost Segregation studies often yield the most substantial advantages for intricately designed structures.

Conventional QIP Cost Segregation Analysis

• Reveals §1245 Assets (5, 7, and 15-year typical property)
• §1250 Eligible Leasehold Enhancements, Retail Improvements, and Restaurant Upgrades (15-year straight-line assets)
• §1250 Certified Enhancement Property (15-year straight-line assets and bonus depreciation for §1250 interior enhancements post 12/31/2017)

Case Study: Food and Beverage Maker with Retail Locations

Facts- In the vibrant realm of manufacturing, a dynamic corporation set forth on its illustrious journey in 1993. With the dawning of 2008, they commenced a strategic expansion plan, gracefully acquiring smaller producers and erecting retail facilities and marketing offices nationwide. Amidst their captivating growth, some acquisitions and improvements were mistakenly classified for tax purposes during 2008-2018. Nonetheless, this resolute manufacturer's indomitable spirit and visionary pursuits continue to propel them toward an extraordinary future.

Execution- In 2019, cost segregation engineers conducted a thorough fixed asset review spanning a decade, revealing opportunities for proper cost classification. Architectural plans, invoices, and inspections were artfully used to identify qualifying components for a shorter tax life, culminating in a detailed and enchanting report.

Result- In a bold financial expedition, it deftly reclassified $6,039,000, with 9% as Qualified Leasehold Improvement Property, 3% as 15-year land improvements, and 20% as 7 and 5-year tangible personal property. The taxpayer's daring choice to forgo bonus depreciation in most years hints at even greater untapped benefits. A captivating tale of financial ingenuity unfolds, paving the way for new and exciting possibilities.