Cost Segregation Studies for Self-Storage Facilities

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Cost Segregation Analyses Performed

250+
Self-Storage Cost Segregation
Studies
Performed

Experience of cost segregation in all 50 states

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Engineers and Tax Professionals

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01

How Does Cost Segregation in Storage Facilities Work?

    • Cost segregation in self-storage facilities is a tax planning strategy that helps owners accelerate depreciation deductions 
    • This engineering-based analysis identifies and quantifies facility components 
    • Components are then reclassified into shorter-lived tax categories, resulting in accelerated depreciation, tax deferral, and increased cash flow 
    • Study can be performed on a newly constructed self-storage facility, an acquired self-storage facility, or a self-storage facility undergoing renovation

02

What are the Benefits of Self-Storage Cost Segregation? 

  • A cost segregation analysis of a storage facility can create $100K-$400K in federal tax benefits for every $1M spent. Engineers generally accelerate 2535% of assets in a self-storage facility 
  • “Bonus” depreciation is an additional incentive that may be claimed above and beyond accelerated depreciation   
  • A quality cost segregation analysis of storage facilities also provides the documentation necessary to support a host of other tax strategies, including EPAct 179D Energy-Efficiency Deductions   

03

Which Components of a Self-Storage Facility May Be Considered in a Cost Segregation Study?

  • Shorter-Lived 5- or 7-Year Assets May Include:  
    • Moveable Wall Partitions (Interior Locker Dividers) 
    • Interior Roll Up Doors 
    • Cabinetry and Shelving 
    • Carpet, Vinyl, or Wood Laminate Flooring 
    • HVAC Equipment 
    • Signage 
    • Fire Extinguishers  
    • Security and Access Control Systems 
  • Shorter-Lived 15-Year Land Improvements May Include:  
    • Landscaping 
    • Paved Parking Lots 
    • Sidewalks   
    • Fencing 
    • Retaining Walls 
    • Storm Drainage
ASCSP Certified Professionals on Staff

Self-Storage Facility Cost Segregation Studies: Case Studies  

Storage Cost Segregation Study:

New Construction

Storage Cost Segregation Study: New Construction

Storage Facility

Rental Office and Three Mini-Storage Buildings

September 2019

Placed-in-service May 2023
 

$2,593,362

Depreciable basis

Engineers Moved

17.8% to 5-Year 

38% to 15-Year Land Improvements

$496,945

First Year Tax Savings

Storage Cost Segregation Study:

Acquisition

Storage Cost Segregation Study: Acquisition

Storage Facility

730 Units, Large Parking Lot with Areas for Boats and RVs

July 2020

Placed-in-service July 2020

$9,180,000

Depreciable basis

Engineers Moved

31.7% to 5-Year 

4.8% to 15-Year Land Improvements

$3,350,700

First Year Tax Savings

Storage Cost Segregation Study:

Acquisition/Renovation

Storage Cost Segregation Study: Acquisition/Renovation

Storage Facility

Drive-Up Facility with Climate-Controlled Units

December 2020

Acquired 12/2019, Renovations Performed and Placed-in-Service: 12/2020

$7,211,747

Depreciable basis

Engineers Moved

20.4% to 5-Year 

8.9% to 15-Year Land Improvements

$187,080 

First Year Tax Savings

Cost Segregation Analyses Performed

Cost Segregation in Storage Facilities: FAQs  

What is Cost Segregation Analysis for Storage Facilities?

The self-storage industry continues to grow, and keeping your property competitive and modern requires a constant influx of capital.  

Cost Segregation is a tax strategy that can provide this needed revenue.  

Skilled engineers can analyze every asset in your self-storage facility – down to each individual outlet in the rental office. Then they’ll assign costs to each asset, and separate the assets by category. Some categories will depreciate faster than others, resulting in accelerated depreciation.  

Cost Segregation Analysis for Storage Facilities

What are the Benefits of Self-Storage Cost Segregation? What is the Impact of a Cost Segregation Study on Self-Storage Taxes? How Does Cost Segregation Impact Cash Flow in Storage Facility Investments?  

Self-storage cost segregation results in an immediate decrease in tax liability and a commensurate increase in cash flow.   

By performing self storage cost segregation, certain assets will be reclassified into shorter depreciation categories. This accelerates depreciation deductions – meaning you get the deductions faster – taking advantage of the time value of money. A dollar today is worth more than a dollar tomorrow – why not get that dollar today?  

This cash can be reinvested into growing your self-storage facility, upgrading amenities, or investing in energy-efficient systems. This will elevate the client experience, pleasing existing customers and attracting new ones.  

Can all Self-Storage Facilities Qualify for Cost Segregation? Are there Specific Assets Eligible for Cost Segregation in Storage Facilities?  

Cost segregation can be performed on virtually any self-storage facility. Commonly segregated assets include shelving and storage systems, security and alarm systems, signage, coiling doors, and movable locker dividers.  

If your facility is climate controlled, the HVAC equipment and associated specialty electric wiring may be eligible for cost segregation. If your facility is located in the suburbs, the landscaping and parking areas may be eligible. Depending on the circumstances, each facility will have a distinct compilation of assets that qualify for segregation.   

Self Storage Cost Segregation Facilities

When Should Cost Segregation Analysis on Storage Facilities be Performed?

Self-storage cost segregation can be performed at any time in the property’s life cycle. Ideally, it’s best to perform a cost segregation study immediately after a self-storage facility is placed-in-service, to maximize savings from day one. However, “look-back” studies may be performed on properties that have been in service for some time, and renovations are a great cost-seg trigger.   

If you’re constructing a self-storage facility from the ground-up, acquiring a new self-storage facility, or renovating your space, a cost segregation study can put money back into your pocket, and into your business.  

Is Cost Segregation only Beneficial for Newly Constructed Storage Facilities? Can Cost Segregation be Applied Retroactively to Older Storage Facilities?  

Cost segregation is beneficial for newly constructed facilities, but can also be applied to properties in placed-in-service in a previous tax year. This is known as a “look-back” cost segregation study. By reclassifying assets to their correct lives, taxpayers can retroactively “catch-up” on all the depreciation they would have gotten had the study been performed on day one.

 

Cost Segregation Analysis Storage Facilities

Are there Specific Regulations or Guidelines for Cost Segregation Studies in Self-storage Facilities?  

Storage cost segregation studies – like all cost segregation studies – must be performed according to the IRS’ Cost Segregation Audit Techniques Guide 

Who Can Perform a Self-Storage Cost Segregation Study?

An engineer-performed study is explicitly recommended by the IRS’ Cost Segregation Audit Techniques Guide. Only a trained engineer has the technical and tax knowledge required to complete a quality study that is both thorough and defensible.  

That said, not all cost segregation providers are created equal. Be sure to do your homework before selecting a provider.  

How Does Cost Segregation Work in Storage Facilities? What is the Process of Conducting a Self-Storage Cost Segregation Study? 

The self-storage facility cost segregation process is quite straightforward  

  • We gather information about you and your self-storage facility.  
  • We provide a complimentary Estimate of Potential Benefits, along with a customized plan to maximize tax savings based on your needs and goals.    

If you decide to move forward with the study:   

  • A Capstan engineer visits your self-storage facility, methodically walking it and taking many notes and photos to quantify each asset.  
  • The engineer will use his notes, along with client provided documents, to painstakingly assign costs to each asset.  
  • The assets will then be segregated into the aforementioned categories, and the results will be evaluated by two different reviewers for tax and technical accuracy.  
  • A thoroughly documented report containing spreadsheets, photos, graphical analysis, and 100+ pages of content will be delivered, along with the Capstan Warranty that promises no-cost defense in the unlikely event of an audit.  
Self Storage Cost Segregation Study

What Documentation is Needed for Cost Segregation in Storage Facilities?  

A Capstan engineer may review documents like AIAs, settlement sheets, or depreciation schedules in order to gather property information  

How Long Does a Self Storage Cost Segregation Study Take?

Timing of a cost segregation study in a self-storage facility will vary based on project complexity, but reports are generally delivered within 30 days of the site visit.  

Are there Risks or Downsides to Utilizing Cost Segregation in Storage Facilities?

The mainpotential drawback of a storage facility cost segregation studyisdepreciation recapture.  

However, if the facility is held for at least 3-5 years, the benefits of accelerated depreciation generally outweigh the potential tax liability from recapture.Furthermore,there are multiple strategiesin play thatminimize recapture,including PAD (Partial Asset Disposition) Elections and 1031 Exchanges.  

Your tax professional andcost segregation consultantcanhelp you determine if recapture tax is a realistic concern in your particular situation. 

Cost Segregation in Storage Facilities

How Can I Determine if Cost Segregation is Right for My Storage Facility?  

If you own or are planning to acquire a self-storage facility with a depreciable basis of at least $1M, you are likely to qualify for cost segregation on your self-storage facility. The best way to determine if cost segregation is right for you, is simply to talk to an expert. We’re here to help.   

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