Hospital Cost Segregation Case Study

Maximize Your Hospital’s Tax Strategy

What is Cost Segregation
Cost segregation is an effective tax planning strategy that helps businesses and individuals involved in constructing, purchasing, expanding, or renovating real estate reduce their tax liabilities by accelerating depreciation deductions, which allows for the deferral of both federal and state income taxes.

Hospitals
Hospitals, with their complex layouts and specialized medical equipment, are ideal candidates for cost segregation, similar to high-performance office spaces with advanced features. Medical facilities often include assets like diagnostic machines, surgical equipment, and custom-built patient care areas, all of which can be separated for accelerated depreciation. This strategy leads to significant tax savings, improving cash flow and optimizing financial advantages. The capital freed up can be reinvested in upgrades, expansions, or enhancements to services, supporting the hospital’s growth and long-term success.

Practical Example

This case study highlights the benefits of accelerated depreciation, showing how hospitals with specialized infrastructure and medical equipment can optimize depreciation for tax efficiency, reduce taxable income, and improve cash flow, boosting long-term profitability.

Building information

○ Building Type 🡪 Hospital
○ Property Type: 🡪 Commercial
○ Building Size: 🡪 116,362 SF
○ Study Scope: 🡪 Acquisition
○ Condition: 🡪 Good
○ Filling Year: 🡪 2023
○ Date Placed in Service: 🡪 2018
○ Purchase Price less Land or Total Construction Cost: 🡪 $7,024,473
○ Tax Rate: 🡪 30%
○ Return on Investment Factor: 🡪 8%

Summary of Benefits

○ 25% Additional Tax Deductions in First Year: 🡪 $3,129,986

○ RNPV Over Remaining Life of Property: 🡪 $833,017

○ Net Present Value (NPV) Over 10 Years: 🡪 $912,545

Building Allocation After Study

5 Year Property

Depreciable Basis: $637,811 at 5%

7 Year Property

Depreciable Basis: $521,845 at 7%

15 Year Property

Depreciable Basis: $851,198 at 12%

39 Year Property

Depreciable Basis: $5,013,619 at 71%

Total

Depreciable Basis: $7,024,473 at 100%

At Leyton USA

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Cost Segregation - Hospital