Cost Segregation for Food and Beverage Industry

[Julio Gonzalez]

Do you own the building of a restaurant, fast food, coffee shop, ice cream parlor or any other type of food and beverage company? If so, did you know many of the assets used in your business are eligible for accelerated depreciation? One way to determine if your assets are eligible and to take the accelerated deduction is through the use of a cost segregation study.

A cost segregation study allows you to reclassify personal property so that instead of depreciating it over 27.5 or 39 years with your building, you are able to depreciate it in 5-15 years. This is extremely helpful for the tax savings benefits but also because many of the assets used in a restaurant business need to be replaced much sooner than 27.5 years.

Some of the major benefits of Cost Segregation are:

• Reduction in real estate taxes
• Reduction in casualty and property insurance premiums
• For previously misclassified assets, you will now have the opportunity to claim any “catch up” depreciation
• By accelerating depreciation, you increase your cash flow
• Having additional cash allows you to invest that money back into your business, invest in other opportunities or pay down your mortgage

Here’s a list of personal property that could qualify for accelerated depreciation:

• Drive-through
• Canopies and awnings
• Flooring
• Point of sale systems
• Decorative millwork
• Kitchen equipment hook-ups
• Doors
• Equipment installation
• HVAC
• Wiring
• Beverage equipment
• Food storage and preparation equipment
• Floor coverings
• Signage site improvements
• Interior light fixtures
• Fire protection equipment

These studies should be conducted with your cost segregation specialist, CPA and financial advisor.

What types of tax strategies do you use in your business?