August 18, 2020

Self Storage Tax Strategies

22 minutes

What type of expense do you prefer to deduct? There are deductions that you recapture, there are deductions that you don't. There's bonus depreciation, and there are flat out expenses. They're all different.

In this episode, Toby Mathis of Anderson Advisors talks to Warren Dazio, Executive Vice President – Business Development for Cost Segregation Services, Inc. (CSSI). The engineering-based consulting firm focuses on the tax law for commercial buildings.

As a natural leader, Warren brings ethics and integrity into every aspect of his life and work. He spent the first 20 years of his career in ministry and has a degree in theology. Later, he pursued an advanced degree in business and received an MBA.

Highlights/Topics:

What is cost segregation? Accelerated depreciation on building to reduce income taxes.

Why is self-storage so popular with investors? Self-storage is a strong investment option because of TPR, cost segregation, and sometimes, 179D.

Can tenants be a pain to deal with? People still deal with tenants, but automation means doing less with those tenants.

What’s more beneficial from a tax standpoint, build or convert self-storage buildings? Converting existing buildings into self-storage gets massive deductions from cost segregation. Building a self-storage facility from ground up has tax benefits, as well.

Besides the cost segregation, are there tax credits that are like cash? Yes and no. A deduction that self-storage can qualify for is 179D. Research and development is a credit for credit, and a 45L associated with residential rentals is a credit.

Is there a dollar amount with 179D that you get per square foot? Yes, it's anywhere from 30¢ to $1.80 per square foot. Focus on the building envelope, HVAC, and LED lighting.

Is that subject to recapture? Gains are under other deductions on your tax return. If it's a deduction, it may be subject to recapture. Tangible property regulations don't have to be recaptured, but bonus depreciation does.

If you’re building a self-storage facility or making a modification, if you do it right, you can get major tax relief, correct? Yes, you probably already covered the associated TPRs, and might have covered partial asset disposition (PAD).

Is there a PAD available? Have you talked to your CPA about it? If your CPA is not aware of it, call a firm that helps you put a dollar amount to the write-off to gain from it. CPAs may not be qualified to do this work.

Can you capture qualified improvement property? Can you capture a bonus? You can capture Section 179, which is a bit different from 179D. Section 179 and bonus are similar. 179D is the energy piece.

What are the different types of cost segregations? The gold standard is the engineering-based method that captures accounting and construction dollars.

Resources

Cost Segregation Offer: https://bit.ly/CSSIGREGBALL

Warren Dazio’s Phone: (225) 241-9823

Warren Dazio’s Email: [email protected]

Cost Segregation Services: https://www.costsegregationservices.com/

179D Commercial Buildings Energy-Efficiency Tax Deduction

https://www.energy.gov/eere/buildings/179d-commercial-buildings-energy-efficiency-tax-deduction

Section 179

https://www.section179.org/section_179_deduction/

45L Tax Credit

https://www.kbkg.com/45l

Tax Cuts and Jobs Act (TCJA)

https://www.irs.gov/tax-reform

Schedule K-1

https://www.irs.gov/forms-pubs/about-schedule-k-1-form-1065

Tangible Property Regulations with Toby Mathis and Kevin Jerry

https://andersonadvisors.com/podcast/tangible-property-regulations/

Toby Mathis

https://andersonadvisors.com/tobymathis-2/

Anderson Advisors

https://andersonadvisors.com/

Anderson Advisors Tax and Asset Protection Event

https://andersonadvisors.com/asset-protection/

Anderson Advisors on YouTube

https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ

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