cost segregation - Linkenheimer LLP CPAs & Advisors

Optimizing Depreciation in the Restaurant Industry Through Cost Segregation

Understanding the intricate dynamics of the tax code is crucial to optimizing profitability in any business, and the restaurant industry is no exception. One area of tax strategy that often offers substantial benefits is depreciation, particularly when coupled with a well-planned cost segregation study. As a part of our commitment to providing the most value to our restaurant clients, we delve into these topics, highlighting how they can significantly impact your bottom line.

Specialized Shorter Lives for Machinery, Equipment, and Furniture

In the restaurant and retail sectors, certain assets such as machinery, equipment, and furniture and fixtures are characterized by their shorter lifespans. The Internal Revenue Service (IRS) allows these assets to be depreciated over five years instead of the standard seven-year period applicable to many other industries. This accelerated depreciation schedule means restaurant owners can recover their investment costs more rapidly, thereby reducing their taxable income and optimizing cash flow in the earlier years of an asset’s life.

Bonus Depreciation

Bonus depreciation is a tax incentive designed to encourage businesses to invest in certain assets. It allows eligible businesses to deduct a substantial portion of the cost of qualifying assets in the year they are […]

By Linkenheimer LLP|2023-08-02T20:52:22+00:00August 2nd, 2023|cost segregation, restaurant|0 Comments

Get Your Piece of the Depreciation Pie Now with a Cost Segregation Study

If your business is depreciating over a 30-year period the entire cost of constructing the building that houses your operation, you should consider a cost segregation study. It might allow you to accelerate depreciation deductions on certain items, thereby reducing taxes and boosting cash flow. And under current law, the potential benefits of a cost segregation study are now even greater than they were a few years ago due to enhancements to certain depreciation-related tax breaks.

Fundamentals of depreciation

Generally, business buildings have a 39-year depreciation period (27.5 years for residential rental properties). Usually, you depreciate a building’s structural components, including walls, windows, HVAC systems, elevators, plumbing and wiring, along with the building. Personal property — such as equipment, machinery, furniture and fixtures — is eligible for accelerated depreciation, usually over five or seven years. And land improvements, such as fences, outdoor lighting and parking lots, are depreciable over 15 years.

Often, businesses allocate all or most of their buildings’ acquisition or construction […]

By Linkenheimer LLP|2021-10-22T20:29:36+00:00October 22nd, 2021|business, cost segregation|0 Comments

Accelerate Depreciation Deductions with a Cost Segregation Study

Is your business depreciating over a 30-year period the entire cost of constructing the building that houses your operation? If so, you should consider a cost segregation study. It may allow you to accelerate depreciation deductions on certain items, thereby reducing taxes and boosting cash flow. And under current law, the potential benefits of a cost segregation study are now even greater than they were a few years ago due to enhancements to certain depreciation-related tax breaks.

Depreciation basics

Business buildings generally have a 39-year depreciation period (27.5 years for residential rental properties). Most times, you depreciate a building’s structural components, including walls, windows, HVAC systems, elevators, plumbing and wiring, along with the building. Personal property — such as equipment, machinery, furniture and fixtures — is eligible for accelerated depreciation, usually over five or seven years. And land improvements, such as fences, outdoor lighting and parking lots, are depreciable over 15 years.

Often, businesses allocate all or most of their […]

By Linkenheimer LLP|2020-09-03T20:03:34+00:00October 21st, 2019|cost segregation, deduction, depreciation, New Tax Laws|0 Comments

Could a Cost Segregation Study Help You Accelerate Depreciation Deductions?

Businesses that acquire, construct or substantially improve a building — or did so in previous years — should consider a cost segregation study. It may allow you to accelerate depreciation deductions, thus reducing taxes and boosting cash flow. And the potential benefits are now even greater due to enhancements to certain depreciation-related breaks under the Tax Cuts and Jobs Act (TCJA).

Real property vs. tangible personal property

IRS rules generally allow you to depreciate commercial buildings over 39 years (27½ years for residential properties). Most times, you’ll depreciate a building’s structural components — such as walls, windows, HVAC systems, elevators, plumbing and wiring — along with the building. Personal property — such as equipment, machinery, furniture and fixtures — is eligible for accelerated depreciation, usually over five or seven years. And land improvements — fences, outdoor lighting and parking lots, for example — are depreciable over 15 years.

Too often, businesses allocate all or most of a building’s acquisition or construction costs to […]

By Linkenheimer LLP|2020-09-03T20:04:28+00:00October 3rd, 2018|cost segregation, deductions, depreciation, New Tax Laws|0 Comments

6 Key Factors to Consider When Evaluating a Property for Cost Segregation

As the real estate market continues to rise, property owners are seeing the need to become more educated on ways to reduce their costs. Knowing that real estate is one of the only investments in the United States that can be depreciated (cost recovery), it comes as a no-brainer that property investors are utilizing the benefits of the tax code via cost segregation in order to maximize their cost recovery!

The IRS allows the separation of building components so that items such as land improvements and personal property can be separately depreciated over the shorter recover periods. A property’s structure is generally subject to a 39-year recovery period (non-residential) and 27.5-year for residential, while land improvements qualify for a 15-year recovery period and personal property qualifies for a 5-year recovery period. As a property investor, let’s say you installed new flooring throughout your building. Every year, you can write that flooring off on your taxes until the end of its useful life. That period of time that the asset depreciates is considered the recovery period and the shorter the recovery period, the greater the reduction […]

By Linkenheimer LLP|2020-09-03T20:04:59+00:00February 3rd, 2017|cost segregation|0 Comments