Cost Segregation for Orthodontic Offices

How Orthodontic Offices Benefit from Cost Segregation

What is Cost Segregation? Cost segregation is a strategic tax planning technique that involves identifying and reclassifying specific components of a commercial property to optimize depreciation deductions. Why is Cost Segregation Relevant for Orthodontic Offices? Orthodontic offices, like many other healthcare practices, comprise various assets, including buildings, interior improvements, and equipment.

Where Does Cost Segregation Apply in an Orthodontic Office? Cost segregation can be applied to different components of an orthodontic office, including the building structure, interior improvements, and equipment. Comparing Regular Depreciation and Cost Segregation To understand the potential benefits of cost segregation, let's compare the figures for regular depreciation and cost segregation based on a case study of Dr.

Smith's investments in his office: In the cost segregation analysis for Dr. Smith's Orthodontic Clinic, the total cost of assets was $1,250,000.

Utilizing cost segregation, the building value could be reclassified, and $120,000 could be depreciated over a shorter period of 15 years. For the interior finishes, with a total cost of $200,000, the regular depreciation would be $5,128 over 39 years.

For equipment worth $150,000, the regular depreciation would be $3,846 over 39 years, while cost segregation would allow for $30,000 of equipment to be depreciated over 5 years. Overall, the total deductions for regular depreciation would amount to $32,051, while cost segregation would enable deductions of $190,000, illustrating the significant tax savings that can be achieved through this strategy.

Conclusion Cost segregation presents a valuable opportunity for orthodontic office owners like Dr. Smith to optimize their tax savings.

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