As we all know, the manufacturers have been after dealers for years to remodel. Whether it is a complete rebuild, a remodel, or even just a facelift, dealers are spending millions to “Keep up with the Joneses”. These remodels are a major event for most dealers, spending thousands on temporary buildings and offsite storage lots, not to mention the loss of traffic and gross in Service and Sales. For the employees and customers, it is also a nightmare. If you’ve ever worked in a temporary trailer in a cold winter in Colorado, you know what I mean.

What most dealers don’t know is there is a major tax credit when it comes to remodels.  Yes, I know what you’re thinking, “My accountant handles that”. Not quite and the answer is simple; it is not their area of expertise. Although some building owners and CPAs have substantial experience with Cost Segregation, most do not. There is a dearth of true educators in this field, which unfortunately leads to much misinformation. These factors have caused countless thousands of building owners to miss out on this powerful tax savings strategy.  This is why in my 21 years as a Fixed Ops Manager, I wondered why dealers spent so much money on advertising, management systems, call centers, social media and the list goes on and on, but they never step back and look how much money may be available to them to offset some of these expenses.

Another question I get asked a lot is “You can only get these benefits on a new building, or new construction, right?” First, I will say an unequivocal “Yes”, it is beneficial to have a Cost Segregation study done when you purchase/construct/renovate a new building. In fact, anyone constructing or renovating a commercial property should have a study completed. However, the true power of Cost Segregation is displayed on buildings that are not new! Here is an example of what you may be missing…

• Mr. Client acquires a commercial property for $3,500,000 five years ago and never completed a Cost Segregation Study.
• Despite rumors to the contrary, Mr. Client recognizes he may now have an opportunity to benefit from a study (maybe he read this blog post).
• Mr. Client hires an expert who identifies 20% ($700,000) of components that should have been allocated to a 5-year life instead of 39 years. Mr. Client jumps for joy when he realizes the IRS will allow him to “catch up” $700,000 of missed accelerated depreciation on his next tax return!

The bottom line is, if you own commercial property, and have not had a Cost Segregation study completed, it’s not too late! Hundreds of thousands, even millions, of dollars in tax savings may be available to you. Be the hero of your bottom line, and take advantage of these savings now.

Marc Bellacosa

Senior Advisor