Scenario Two with Cost Segregation: Joe buys a hotel for $7,000,000 and it provides him with $350,000 of taxable income.
Joe also owns several other properties and businesses that provide him with an additional $600,000 in taxable income resulting in a total taxable
income of $950,000.
Richmond Taylor group returns with results allocating 23% to 5 year property and 11% to 15 year property resulting in a first year depreciation deduction of $1,423,835 which times Joe's 35% tax rate would save him $498,342.
Joe's tax burden of $332,500 is now completely gone with a leftover deduction for the next year of $165,842 in addition to his second year depreciation deduction of $135,835 resulting in a total second year deduction of $301,677 saving Joe a total of $438,086 in two years.