Cost Seg Building

A Blog About Tax Savings for Building Owners

Author: John Murphy (Page 1 of 2)

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.

Self-Serve Car Washes Qualify for 100% Bonus Depreciation—Here’s How It Works

January 1, 2026 /

We all know that tunnel car washes get 100% bonus depreciation meaning that the entire cost basis can be deducted in Year 1 provided the other criteria is met with year placed into service, purchase date or construction starting date. But let’s assume these car washes were purchased late in 2025. Even the self-serve car washes can qualify for 100% bonus depreciation for the entire cost basis.

Car washes are considered land improvements and not real property per se when it comes to depreciation. All of the improvements can be identified as 15 year class life – land improvements. Certainly much of the machinery would be 5 year life if you did a cost segregation study, but you don’t need to do one to claim all of this as 15 year life.

Let’s say you buy a car was for $700,000. Maybe the land is worth $300,000. That leaves you with $400,000 in cost basis. That can all be taken as a depreciation deduction in Year 1. You can deduct the entire thing. You can fully depreciate the property in one year. Pretty amazing.

Feel free to reach out if you have questions. I’d be happy to discuss. Here’s a short video I did on the topic.

Year-end Tax Planning for CPAs, Building and Business Owners – Cost Segregation

November 7, 2025 /

It’s that time of year again – Q4 and people start to scramble to see what their tax liabilities are going to be for the year. Business owners are meeting with their tax advisors and accountants to see what the damage is going to me. Many times the topic of cost segregation comes up and a smart tax advisor will encourage his/her building owner client to get a cost segregation study done. If you don’t have a resource to get that done, I’d be happy to be of help to you.

I work with building owners, investors, CPAs, EAs, tax professionals, commercial real estate brokers and REALTORS all across the U.S. to get cost segregation studies done so they can save money on their income taxes.

Check out our new resource at www.CostSegCalc.com. Plug in your asset details and you will see what you can save on your taxes. If you need a quote for the study, you can fill out the form there or give me a call.

Cost Segregation Savannah, GA

November 6, 2025 /
Savannah, GA Industrial Real Estate - Office Warehouse
Savannah, GA – Industrial Real Estate

Savannah, GA is one of the fastest growing areas in the country and commercial real estate is benefiting from that growth. The Port of Savannah is a huge driver of the growth and particularly industrial real estate as demand for warehouses grows.

I love Savannah! It’s a beautiful, historic Southern city that has such a great mix of new and old. Many buildings are being renovated and many others are being torn down and new ones going up. If you own commercial real estate in and around Savannah, GA and you want to discuss cost segregation, please reach out and I’d be happy to talk.

Regularly I get questions from CPAs, tax advisors, CRE brokers and building owners if a particular building is good for cost segregation. The fact of the matter is, most buildings with a basis north of $200,000 can generate a nice result with cost segregation. It will depend upon whether or not the owner can benefit from the increased accumulated depreciation expense our studies generate. We always encourage owners to consult their tax advisor before moving ahead with a cost segregation study.

In the video below, I run through some examples of recent sales and plugging in the asset details into our Cost Seg Calculator to see what kind of results might be expected from a cost segregation study.

Investors Bet Big: 39 Mobile Home Parks Sold Over $10M in the Past Year

September 18, 2025 /

The topic of mobile home parks as a hot new asset that many investors are pursuing is something that I have regular conversations about with a variety of investors. There are lots of parks between $1-$5MM but how about the big ones over $10,000,000? Are there many transactions at that scale?

In the past 12 months (Sept 2024 – August 2025) there have been a total of 37 parks that have sold for more than $10,000,000 according to my search on Crexi today. The highest price paid in this search was $35,000,000 and it just closed a month ago.

Investors are moving aggressively into mobile home parks because historically, they have been run by mom and pop shops. Think SFRs before Wall Street moved in with massive portfolio purchases. Many of these parks could stand to have an influx of capital and many need updates and repairs but at the same time, that means rents will rise and this is the last bastion for the lower classes to afford a home.

I get contacted a lot about mobile home parks and how cost segregation studies perform on these properties. I’d be happy to talk with you if you are in the market to buy a park. Mobile home and RV Parks do exceptionally well when it comes to cost segregation. It’s one of the reasons investors like them in addition to the incredible cash flow. Be sure to check out this highly read article I published some time ago and updated recently to reflect the One Big Beautiful Bill regarding Cost Segregation for Mobile Home Parks.

If you’d like the list of the properties highlighted in the post image, let me know and I can share that with you.

Common Misconceptions about Cost Segregation

September 17, 2025 /

I talk with lots of tax advisors and building owners as you can imaging. Despite cost segregation becoming more commonplace these days especially with commercial real estate, there still remains lots of misconceptions about it. I recorded a short discussion about some of the big point.

Cost Segregation for REALTORS

December 9, 2022 /
Cost Segregation is particularly valuable for REALTORS® as often times the large depreciation expense generated by a cost segregation study can be used to offset their income generated from selling homes.
Cost Segegation is particularly valuable for REALTORS®

Many REALTORS® own investment property and some own commercial property. If they do real estate full time, generally they can use depreciation from their real estate investments to offset tax liability from their real estate sales activity. As always, please consult with your own tax advisor to make sure you qualify for this and that your involvement with your investments is such that you can utlize the depreciation to lower your income taxes.

But let’s say you do qualify and you have the following scenario…

REALTOR® Commissions for 2022 net after expenses: $150,000. Let’s say you own a single family rental home that you purchased this year for $325,000 and the land is worth $50,000 leaving you with a building cost / basis of $275,000. When you evaluate your P&L on your rental home after deducting your expenses, debt service and standard depreciation, you end up making $2,000 net profit this year. That certainly isn’t going to create much of a tax burden for you so you wouldn’t do a cost segregation study just to save $700-$800 taxes for the year. But this isn’t the entire picture. In this situation, a cost segregation study may help you save about $15-$20k in income taxes. Let’s take a look.

If this building was put into service right away Jan. 1, 2022, your depreciation for the year would be $10,000 which is the straight line depreciation amount you can take each year for the life of your ownership or until you’ve fully depreciated the building after 27.5 years. A cost segregation study might generate a depreciation expense of about 20-25% of the cost basis which was $275,000. A study would generate a depreciation expense of about $55,000 – $68,000 which means this REALTOR could likely lower their taxable income from $150,000 to $95,000 or lower. That might be a 30% tax savings for this agent which would be about $15-$20,000. The cost to do a study like this might be $2,250 – $2,500 – net cost would be about $1,500. Pay $1,500 and save $15,000 on your taxes. This is a 10:1 ROI or a 1,000% return on your money. Not bad.

REALTORS® especially should consider cost segregation as a tax minimizing strategy if they own rental investment properties or commercial properties. As always, please consult with you tax advisor. If you have questions or would like to get a quote, please don’t hesitate to reach out to me at john.murphy@costsegregationservices.com or 864-276-1448. I work all over the country in all 50 states.

Land Improvements Can Be Incredibly Valuable in Cost Segregation Studies

September 16, 2022 /

Everyone thinks about buildings when they think about depreciation and the benefits of cost segregation, but don’t forget about the massive positive impact land improvements can on your depreciation. It’s common that land improvements might be anywhere from 4-15% of your overall building cost or basis. Sometimes we’ll even see 25%+! With 100% bonus depreciation, let’s say you have a $1 million building….if 10% of the building cost is land improvements, you could potentially take a $100,000 deduction in year one of your ownership! That right there would be about a $30,000+ tax savings – i.e. the money stays in your bank account and not the IRS’s.

The IRS classifies land improvements as 15 year class life property. Depending upon the type of property, we will regularly see such land improvements as:

  • Parking lot / driveway
  • Parking lot striping and barriers
  • Sidewalks, patios and curbs
  • Site drainage
  • Exterior signage
  • Landscaping and irrigation
  • Retaining walls
  • Security light poles
  • Exterior fencing
  • Exterior dining enclosure
  • Exterior bollards
  • Dumpster enclosure
  • Pool
  • Docks

Site improvements can have a BIG impact on your depreciation and provide a big depreciation expense for building owners when they apply a cost segregation study. Remember the cost segregation study will separate out your property from it all being lumped together as either 39 year (commercial) or 27.5 year (residential investment). Property will be reclassified to 5, 7, 15, and 27.5 / 39 year property. Right now for properties purchased / in-service as of Sept. 28, 2017 – December 31, 2022 can take 100% bonus depreciation. Bonus depreciation is available for property with class lives of less than 20 years…so all your 5, 7 and 15 year property could be depreciated in year 1 of your ownership. That can provide a significant tax savings for owners. Depending upon the building, you might be able to immediately depreciate 10-30% of the overall building cost or basis.

For those who want to grind harder on the topic, here’s the official link to the IRS on how to depreciation property. It’s a comprehensive list on all types of property and class lives. Otherwise, if you’d like to talk with me about seeing if your property might be a good fit for cost segregation, please don’t hesitate to reach out. My information is available under the Contact tab above or connect with me on LinkedIn.

As always, please consult with your own tax advisor for your specific situation to see if a cost segregation study might be beneficial to you.

Cost Segregation for a Panera Bread Building – $100,000 Tax Savings

September 15, 2022 /
Photo Credit: John Murphy, Cost Seg Building

Cost segregation works pretty much on all commercial buildings. If the building cost is north of $175,000 or so, there are tax savings being left on the table if the owner does not segregate the building in to 5, 7, 15, and 39 year class lives which is what happens when you do an engineering-based cost segregation study.

What might one see for results in such a study for a Panera Bread commercial building? Well, the owner might save about $100,000 on his/her income taxes by doing a study. The cost of the study would be a small fraction of the overall savings.

Let’s say in this scenario we have the following:

Building Cost: $1,500,000

Increased Accumulated Depreciation: $310,000

Estimated Tax Savings @32% Federal Rate: $99,200

The building owner doesn’t have to write a check to the IRS for that $99,200. The money stays in his/her bank account and they can do with it as they see fit….remodel bathrooms, buy a new building, buy a new car, pay off debt, increase wages for employees, buy a short term rental, take some vacations….they money is there’s and remains with them. I don’t care how much money people have…they could have millions, but there hasn’t been a single person yet that I’ve come across who says they aren’t interested in keeping an extra $100,000. And it doesn’t have to be $100,000….we run scenarios for all kinds of property…let’s say you own a building that is only $300,000 but by doing an engineering-based cost segregation study, you might be able to save $15,000-$20,000 on your taxes. That’s real money and people would rather keep that money in their bank accounts rather than the IRS’s.

Note, the numbers above are estimated tax savings. Each study is different and we wouldn’t know the final results until the actual study is completed. A building owner’s tax situation and tax rate might be different. If they were in the 37% tax bracket their tax savings would be quite a bit higher. If they are in a lower bracket then the savings would be lower. As always, I can’t give tax advice. When considering cost segregation, get an estimate and then discuss it with your own tax professional to see if you can benefit from doing a study.

Why Commercial Brokers Should Offer Cost Segregation Services

September 14, 2022 /

Commercial brokers play a very important role in the ongoing development and improvement of a community. They are often in-the-know of what’s happening in a particular area…who’s developing what and which companies are moving in and/or expanding. They help business owners, building owners and investors of all kinds with sourcing or developing a building or project to suit the prospective owner’s needs. They often can help give recommendations on financing, inspections, engineering, surveying, insurance, renovations, construction etc. The one area they are weak in is in cost segregation.

Why should commercial brokers have a trusted source for cost segregation amongst their mix of other expert advisers whom they can readily share with a prospective client? It’s pretty simple….commercial brokers should introduce cost segregation to every client and have each building evaluated. There’s no cost to do this and the upside is significant certainly for the client. The commercial broker can also generate another income stream for his brokerage by partnering with us to deliver this service to his clients.

We know the upside for the client on cost segregation but why wouldn’t the commercial broker also participate in creating another revenue stream? Ask me about our referral program. It can help pay for some office lunches, outings and year end parties. But the bigger thing is that the broker will have helped his client maximize his/her building by saving a lot of money on taxes. The tax savings provided to the client might actually be enough to help that building owner go buy another building of which the broker may represent him/her on that and make another commission.

Remember, not every building or every building owner is going to need to actually do a cost segregation study. Some buildings aren’t profitable and maybe won’t be for some time. Some owners aren’t particularly profitable either and so they don’t need the tax deductions. However, every building should be evaluated so you at least have it on hand and can reference it each year as you review your particular tax situation for that year. Perhaps you don’t do cost segregation for a variety of reasons in 2022…maybe not even in 2023. But by 2024, it probably makes more sense. Well, a smart business owner, building owner and investor is going to know what that might look like for him or her. There’s no reason they should not have an estimate on hand and in their files. It should be part of a normal business and tax review process if not quarterly…at least annually.

Cost segregation will save big money for most owners. They might see between $30,000 – $70,000 in income tax savings per $1 million in building cost or basis. We can do studies on buildings with a cost or basis as low as about $175,000.

Lastly, I will say that as I speak with building owners, 8 or 9 out of 10 have not heard of cost segregation. Of those that might be familiar with it, there’s a lot of misperceptions as to it’s value vs. it’s cost. It’s very common for me to quote estimates that demonstrate a 10, 15, 20:1 return on their investment in the study. That’s a 1,000 – 2,000% return. Most commercial real estate delivers returns in the 5-8% range…we’re talking massive returns here with cost segregation compared to the investment in the study. The most likely way a building owner would hear about cost segregation would be through the commercial real estate broker. Please share the information…make an introduction and let’s help building owners maximize their buildings, lower their taxes and increase their cash flow.

Be sure to reach out and I’d love to help – John Murphy, 864-276-1448

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