**Maximizing Your Tax Savings on Building Improvements** 

Let’s talk briefly about the tax benefits you might be missing out on with your building when spending money for tenant or capital improvements. If you did a $375,000 tenant improvement or capital improvement to your commercial building in 2024 and are not doing cost segregation, you’re likely overpaying your income taxes by $10,000 to $15,000 over the next five years.

Today, most of these improvements go unstudied, leaving building owners with significant, unclaimed tax savings. Typically, CPAs will record improvements as “qualified improvement property” (QIP) with a 15-year class life, which allows for 60% bonus depreciation. While that’s within the tax code, this approach often overlooks substantial five-year property within the improvements, which could yield faster and more significant tax deductions.

**Why a Study Makes Sense** 

When improvements are carefully studied, a sizable portion (15–50%) can often qualify as five-year property. For example, a $375,000 improvement could yield 30-40% in five-year property. Without a study, you miss the opportunity to accelerate your deductions and enhance your cash flow.

Consider this example: 

– If a study costs around $3,500, your net tax savings start showing by year two. By year five, you could be ahead by $10,000 or more.

– Even with a conservative outcome of 25% five-year property, your savings could be around $6,000 over five years; at 50%, you might save $15,000.

These are potential savings you’re leaving behind if you simply default to the QIP classification without a study.

**Optimize Your Investments** 

This isn’t just about tax savings; it’s about making the most of every dollar you invest in your property. Those savings could fund more improvements, support business growth, or even personal goals.

**Let’s Get Started** 

I’m John Murphy with CSSI. I’ve developed a custom calculator to help building owners and CPAs understand the real potential of cost segregation on improvements. I work nationwide, and with our network, I can handle projects in all 50 states efficiently, without incurring travel costs. So while I’m in the Southeast, I can study buildings across the rest of the country and it does not cost you more money. If you did improvements in 2024 that were more than $200,000, call me for a conversation. There’s no cost or obligation. I can run the numbers for you and you can see how this might help you.

Let me ask you this…and I don’t care how much money you have…if you knew that there was $10,000 that could be in your bank account over the next few years but instead is sitting there in the government’s IRS accounts, wouldn’t you want your money?

Learn more on my blog at www.costsegbuilding.com, and connect with me on LinkedIn or social @costsegbuilding. Let’s discuss how a study could benefit your next project and help you maximize your building’s tax efficiency.

John Murphy, CSSI / 864-276-1448 / john.murphy@cssiservices.com