Husband of 34 years to my college sweetheart, Janet Murphy (@janetmurphydesign on Instagram). Together we have 6 wonderful children from ages 15-31 and 5 grandchildren. I've been a licensed REALTOR since 2003 and broker since 2007. I also am a cost segregation specialist helping building owners and real estate investors maximize their tax deductions, save thousands on their income taxes and increase their cash flow. If you're a building owner you probably haven't done a study...let's connect. There is no obligation. We can run an estimate for you and really every building should be evaluated if the basis is over $150,000. I can work all over the country and not just here in the Upstate. We relocated to Greenville, SC for the lifestyle, lower cost of living, amazing amenities in the area and the growth opportunity for business and real estate. We absolutely love it here!
All opinions are expressly my own and do not represent either eXp Realty LLC, Cost Segregation Services, Inc. or any other company, organization or group that I might be affiliated with.
Drywall is a phenomenal creation but we end up with WAY too much of it in landfills. It’s a problem. By using Green Zip Tape you can help your community by keeping drywall out of your local land fills. It makes for a FANTASTIC pitch by the way to city and county councils as you are seeking your approvals. There are also fantastic tax benefits to be had.
If you are building a hotel, multi-family, office or medical facility and you are not using Green Zip Tape, you are missing out on many opportunities to improve your project from all facets…construction, environmental, tax, cash flow and value.
$10MM+ construction projects
Let’s talk about it. Give me a call anywhere in the U.S.
Take a listen to Trinity Partners Greenville Managing Broker, Partner, Edward Wilson and Senior Broker, Grayson Burgess and they discuss the market outlook for commercial real estate in South Carolina. Edward and Grayson work across the state and are based in Greenville, SC. I’ve worked with both of these gentlemen and they are tremendous resources for commercial real estate in the Upstate of South Carolina.
GE Vernova just announced a $600 million commitment to expand and improve it’s business in several locations across the U.S. Greenville will see $160 million investment that will lead to 550 new jobs.
The Greenville facility is massive spanning 413 acres with plenty of manufacturing space. They are not planning to expand the footprint of the facilities. According to the Upstate Business Journal, “the investment will be improving infrastructure and adding machinery and equipment to push production from an average of about 50 turbines per year to between 70 and 80 annually.”
Yahoo Finance has some excellent details on the capital commitment. Fuel Cell Works also has a lot more information about the innovative, technological advancements and research that is planned with this investment.
The demand for energy and data centers to power the growth of AI is exploding. There will be lots of investment in data centers despite the scare this past week from China-based DeepSeek.
For those who have a lot of income and tax liability who are building multi-family and hospitality properties, consider the following. It’s unlikely your tax, financial and construction advisors are taking all of these strategies into account.
Build with Green Zip Tape. By doing so, about 10% of your construction costs will move from 39 year life to 5 year life allowing you to take bigger depreciation deductions earlier. This is above and beyond what you would normally get with cost segregation. $10MM project might see an additional $1MM in 5 year life. At a 35% tax rate that’s $350,000 in income tax savings or deferral. No brainer.
Utilize 263(A) if you qualify. This allows you to EXPENSE indirect costs associated with the construction of your building. This works for self constructed assets. Must be a small business and fall under the government requirements (about $30MM in revenue or less). Can’t be a syndication. If you are building this for your own investment or own use, look into it. $10MM project could see 10-15% written off as EXPENSE and not capitalized. Also can be utilized in a tax year prior to your building going into service – say you started construction in 2024 but won’t finish and go into service until 2025…you an write off some of this on your 2024.
179D – Energy Efficiency Tax Deductions….this is for buildings with 40,000 SF or more (our requirement – not the government’s). We say 40,000 because there’s a cost vs the deduction analysis. At 40,000 it definitely makes sense. It might work at 30-35,000 SF. Might see a deduction of $.88/SF to $1.16/SF…could go all the way to $5/SF but many hurdles for that. Let’s call it $1/SF…that’s a $40,000 deduction for a 40,000 SF building. Nice thing is this deduction essentially comes out of the 39 year class life. It is not subject to potential limitations of bonus depreciation. If you’re going to hold the building, it’s also a no-brainer if you need to maximized deductions.
Cost segregation – of course this is the BIG tax deduction. Many building owners will see 20, 25, 30% of their building reclassified to 5 and 15 year life giving them a massive up front deduction. Without cost segregating your building, you will deduct 2.5% per year of the building cost (1/39). $10MM building cost could see $2-$3MM in depreciation expense moved to 5/15 year life. Depending upon the bonus depreciation rules at the time they might be able to take part or all of that either in year one or early on in their ownership.
As with all of this, please consult with your tax advisor before proceeding. If you’d like to discuss your project or any of these items noted above, please let me know. Connected with me on LinkedIn.
It what will go down as an historic week in U.S. history with the inauguration of Donald J. Trump to his second term as President of the United States, he made news at Davos at least for the commercial real estate industry.
Many have speculated that Trump would bring back 100% bonus depreciation in 2025 as he extends his 2017 Tax Cuts and Jobs Act. He confirmed this yesterday during his video presentation to the 3,000 attendess at Davos Switzerland where the WEF and global elites were meeting to plan our futures.
During the Q&A, Brian Moynihan ask President Trump a very broad economic question. As Trump was answering it, he made mention that he will be bringing back 100% deductibility in the first year – i.e. 100% bonus depreciation. You can hear his comments at the 30:35 mark of the video presentation. This will be great news for the commercial real estate industry. Of course he has to negoatiate this with the Democrats but this nearly got extended a year ago when Biden was President. It never made it to his desk for his signature as the Senate killed the bill. It’s different this time though. The Trump Tax Cuts are set to expire in 2025 and no one wants to be on the hook for a big tax increase. Additionally of course you have the leadership of Trump at the helm driving this instead of the much weaker Republican Congressmen and Senators. I’d be shocked if this doesn’t get approved. Not sure of the timing but I think from what I’ve heard it will be April perhaps before they get something done.
If you’re doing cost segregation studies right now for 2025 taxes, there’s no worries. When we do our studies, the results are the results and your tax advisor will apply them appropriately whether it’s 100% bonus depreciation or if it remains at 40% depreciation which is what the 2025 law current states.
It might be just a bit too early to fully assume that this will be the case for 2025 but you might want to start to run 2 scenarios with your pro-formas…one for 40% and the other at 100% bonus depreciation.
My hope is President Trump pushes to make bonus depreciation permanent. He wants America to get back to growth. The 100% bonus depreciation affects a lot more than just owners of commercial real estate. It would seem to me to be a no brainer that if you want to make American the growth engine of the world and have Trillions of dollars of capital investment find their way here, make this incentive permanent. No more 4-5 year shots for it to be renegotiated.
If you’d like to watch President Trump’s address to the attendees at Davos, the recording is below. He mentions 100% deductibilty at the 30:35 mark.
I recently received a call from a CPA with questions about oil service buildings and their tax treatment. There’s a common misconception that these buildings are 100% deductible, but that’s not entirely accurate. Many commercial real estate brokers market the supposed automatic bonus depreciation benefits of these properties, but the reality is more complex. Unlike convenience stores (C-stores) or tunnel car washes, oil service buildings face more challenging qualifications in order to claim it all as 15 year class life. We have not heard that the IRS is scrutinizing how owners are depreciating these buildings, but it would seem to be a pretty easy target given the assumptions many in the industry make about oil services buildings.
Understanding the Classification Nuances
Let’s start with the fact that commercial property is considered 39 year class life property meaning you get to depreciate it over 39 years. That amounts to 2.5% of the building cost per year is taken as a deduction (1/39). Oil service buildings might be able to be identified as 15 year class life and thus eligible for bonus depreciation. Bonus depreciation used to be 100% from Sept. 27, 2017 – Dec. 31, 2022. The law has it declining 20% each year until it is zeroed out by 2027. For 2024, bonus depreciation was 60%. (Congress will be considering reupping the Tax Cuts and Jobs Act which would bring back 100% bonus depreciation, but we won’t know that until later this year in 2025). Properly classifying oil service buildings under the 15-year class life rule isn’t as straightforward as it is for C-stores or tunnel car washes. Owners and their tax advisors should thoroughly understand the rules and ensure proper documentation to avoid potential IRS challenges.
For oil service buildings, the critical qualification is that 50% or more of the revenue must come specifically from petroleum sales. Oil of course is petroleum but the labor to change the oil is not. Oil service shops sell other services and products that further make it difficult to achieve that 50% petroleum sales threshold. It’s not uncommon to see these shops selling other fluids, filters, wiper blades etc. Brands such as Jiffy Lube are expanding beyond oil changes to provide other services. This seems like a smart move for the brand to capture more of the expenses Americans have with maintaining their cars. Jiffy Lube now has these beautiful, larger, modern MultiCare buildings. No doubt this is good for business but just note it’s likely going to make it very difficult to achieve that 50% petroleum sales qualification to claim the entire building as 15 year class life.
Claiming Depreciation: When It Works and When It Doesn’t
If an oil service building meets the qualifications, tax advisors can claim the entire property under the 15-year class life and apply the appropriate bonus depreciation. For example, if a $2.5 million building (with $500,000 allocated to land) was placed in service in 2024, the owner could claim 60% bonus depreciation on the $2 million building value, resulting in a $1.2 million deduction. This approach avoids the need for a cost segregation study.
However, if there’s any uncertainty in meeting the 50% revenue threshold and proving it with documentation, then conducting a cost segregation study is a likely a wise investment.
Why Cost Segregation Makes Sense
If you cannot achieve that 50% petroleum sales criteria, then a cost segregation study will almost always make sense. Oil service and multicare auto service buildings have a lot of 5 year and 15 year class life property. You should identify this property to maximize your deprecation. It’s also helpful to have this segmented in the event you have to replace some of this property over the normal course of operations of your business. It makes dispositions much easier which again will help you save money on your taxes. a cost segregation study can still provide substantial benefits. Many of these buildings will see 30, 35, 40% of the overall cost of the building reclassified to 5 and 15 year life providing the owner with a significant deduction in the year in which the cost segregation study is applied.
Looking ahead to buildings placed into service in 2025, bonus depreciation will be 40% unless Congress enacts changes. If lawmakers restore 100% bonus depreciation, property owners may be tempted to skip a study and claim 100% depreciation on these oil service buildings. At the end of the day, that’s a call that’s up to the owner and his/her advisors. We get a chance to evaluate a lot of these buildings as you might imagine. Most of the buildings do not hit the 50% threshold. It’s not us making that determination to try to get a study out of the owner. This analysis is done by the owner / operator and tax advisor and they usually can’t confidently say they hit 50%.
Avoiding Costly Mistakes
Incorrect depreciation claims can have serious consequences, and if the IRS decides to target owners of oil service buildings, they would be easy targets. If you own a building or if you are a tax advisor who has a client who owns one of these buildings, if they can’t confidently document that they hit the 50% petroleum sales qualification, then do the smart thing and have a cost segregation study done. You’ll sleep better at night knowing that you have the proper documentation and classifications of your building backed up by an experienced third-party cost segregation company.
The Bottom Line
If you want peace of mind and confidence in your depreciation strategy, a cost segregation study is a valuable tool. The cost of the study is minimal compared to the potential savings and security it provides. Don’t take unnecessary risks—ensure you’re depreciating your oil service building correctly to maximize your depreciation and tax benefits while complying with the law.
Owners of bank buildings and branches are prime candidates for cost segregation studies because of the significant tax savings and financial advantages it can provide. It’s important to get a cost segregation study done so you have all the building components and systems identified. This is the case whether you continue to operate it as a bank or if you are repurposing the building. I have come across a lot of older bank buildings that are often being used as office space for a new tenant or owner.
Bank buildings are particularly well-suited for cost segregation studies. Their specialized design and features often qualify for accelerated depreciation, especially within the 5-year property class life. There are numerous specialty components that are unique to banking that offer valuable depreciation benefits.
Here are some key components and systems to identify for shorter class lives:
Specialty electrical and plumbing systems
Drive-up windows
Interior glass windows
Pneumatic tube systems
Night depositories
Safes and safe deposit boxes
Vault doors
Even if you’ve converted a bank building into more traditional office space, many of these specialty items often remain. Reclassifying these assets to their proper 5-year lives, rather than leaving them as 39-year assets, can yield substantial tax savings. Additionally, if you end up removing some of these systems, if you have identified them, you might be able to take a partial asset disposition which would yield another excellent tax deduction.
Nationwide Service with Local Expertise
While I’m based in Greenville, SC, I study buildings like this all over the country. Whether your property is here in the Carolinas or across the country in California, it costs no more to engage my services. Our nationwide network of professional photographers ensures we can efficiently document your property to provide an accurate and thorough cost segregation analysis. The firm I represent, CSSI Services, works nationwide in all 50 states and we work on all types of buildings.
Let’s Talk
If you own a bank building—or any commercial property—and want to explore the tax-saving opportunities of cost segregation, give me a call. I’m happy to provide a no-cost, no-obligation estimate for your building. It’s a simple way to uncover hidden value and improve your bottom line.
I happened to be going through some closed sales information and saw that Amazon closed on the 104 acre parcel located just outside the City of Fountain Inn’s city limits. It’s right off of I-385 and Fairview Road Extension. It’s a great location. I’m not sure what the plans are to possibly modify that exit and entrance ramp there but it needs some help. It’s almost like it’s an after thought. I was down there the other day at 4pm and it sure seemed like a great place for possible accidents on the interstate as people try to take that short little exit that is often congested at that time of day.
QT’s are well loved here in the Upstate of South Carolina and this store does some great business. It’s right in the heart of the retail shopping area known as Woodruff Road. There are 145,000 vehicles per day that travel along Woodruff Road. It’s quite remarkable.
Worth noting, there was a brand new 7-Eleven that was just built a couple of blocks away from this QT. That 7-Eleven sold in August of 2024 for $6,550,000.
If you have not experienced a QT yet, please be sure to check them out.
This came across my LinkedIn feed yesterday. I always appreciate what John Drachman has to say. He does a tremendous job of noting the key points from Newmark’s Capital Markets recent quarterly report. If you’re in commercial real estate, be sure to read Drachman’s post below.
