The property is a distribution warehouse owned by a major wholesale automotive distributor serving its retailers in New York and northern New Jersey. This case study highlights the Phase 2 and 3 renovations. Phase 2 involved gutting the building’s 30,400 square foot office area to add new offices, a board room, lunchroom, open office area, executive kitchen, coffee bar, wellness room, IT room, and bathrooms. Phase 3 was a renovation of the existing 75,200 storage warehouse to update its flooring, interior lighting, security system and loading dock equipment. Both phases were completed and placed in service in 2021.
After conducting a cost segregation study that saved our client significant income taxes, CRS engineers were confident that the energy-efficient materials used to complete the warehouse renovations would enable the client to qualify for an additional 179D deduction. The incentive enables taxpayers to take either a partial or full deduction for three building components (lighting, HVAC, and building envelope) if they meet the Department of Energy’s energy-efficiency guidelines. In 2021, deductions were calculated at a rate of $.61 per square foot for each component or a maximum of $1.82 per square foot if all three qualified. As an independent third party, CRS conducted a thorough analysis of the materials used throughout the building renovations to determine eligibility for the deduction.
CRS was able to certify that all three systems in the warehouse met the IRS’ energy-efficiency requirements. Our 179D certification enabled the client gain over $20,000 in federal tax savings. An additional first year tax savings of $4,276,400 was gained through our cost segregation study. Click here for the cost segregation case study.
Qualifying Property | Total Energy and Power Cost Savings | Floor Area (Sq. Ft.) | Benefit Rate (2021) | 179D Deduction | Tax Savings |
|---|---|---|---|---|---|
Building (envelope, HVAC, lighting) | 52% | 30,293
| $1.82
| $55,133
| $22,053
|
Two years after the completion of the 179D energy-efficient certification and cost segregation study, our client was audited by the IRS on their federal taxes. Thanks to the diligent investigations, comprehensive analyses and thorough documentation submitted by the CRS team for both projects, our work was fully validated and there were no IRS changes at all to the tax return.
Take control of your property’s tax burden and discover the hidden potential in your assets.
© 2025 Cost Recovery Solutions LLC
