Cost Segregation delivers results every time it's applied!

Bliss Dental Uses Cost Segregation to Accelerate Depreciation

Posted on February 26, 2013 by Jeff Hobbs

Bliss Dental Uses Cost Segregation to Accelerate Depreciation.

At Bliss Dental the kids and family are treated like royalty! It’s a fun staff who knows how to take care of their patients. I had the pleasure of conducting a site survey on this facility and was impressed with the amount of tangible personal property within. Our engineering analysis ultimately uncovered over 48% qualifying assets for accelerated depreciation!

Most dental offices have an amazing amount of qualifying assets (tangible personal property) such as dedicated plumbing (dental sinks), dedicated electrical (dental lighting, drills, etc.) decorative lighting (wall sconces or recessed lighting), vacuum systems, carpeting, dental gas piping and equipment, cabinetry, and much more.

There are two types of dental facilities: freestanding buildings where there are no other businesses attached, and office condos or leasehold improvements.

A freestanding building housing a dentist’s office is an asset normally depreciated over 39 years where 1/39th of the cost is deducted each year from your income taxes. When cost segregation is applied, the method of depreciation is changed from the SLMM (Straight Line Method) to MACRS (Modified Accelerated Cost Recovery System). MACRS is the method of depreciation required by the IRS, so employing it with cost segregation actually brings the builder owner into IRS Tax Compliance. Once cost segregation has been applied, the assets qualifying for short-life depreciation are reallocated to 5- and 15-year lives (either under IRC Sec. 1245 or Sec. 1250).

Office condos or leasehold improvements (aka, Qualified Leasehold Improvements, QLIs, or Tenant Improvements) are normally depreciated over 15 years where 1/15th of the cost is deducted each year from your income taxes. Here, when cost segregation is applied and the method of depreciation is changed from SLMM to MACRS, the “short-life” assets under MACRS are now all 5-year for dental offices as they are considered under Asset Class 57.0 or Distributive Trades. The “real property” assets like non-movable walls, doors, windows, HVAC, etc. are all 15-year depreciable assets because they are considered under the QLI statute with the IRS.

So, what does this mean? When cost segregation is applied to accelerate depreciation, the Dentist (building owner) reduces their income tax burden significantly, sometimes temporarily eliminating federal taxes for a brief period of time. This keeps the money you’ve earned in your pocket longer…a dollar today is always worth more than a dollar tomorrow…it’s called time-value of money.

Cost segregation delivers results every time it’s applied!

To learn more, or to receive a free estimate, click on FREE ASSESSMENT to open a simple one-page client profile questionnaire. Complete this brief survey and we will provide you with a detailed benchmark analysis identifying the expected accelerated depreciation as well as the fixed fee for service.
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