Maximizing Cash Flow and Tax Savings in Real Estate Construction

Maximizing Cash Flow and Tax Savings
in Real Estate Construction


A medical doctor constructed a $2.5 million private clinic on land that he had acquired several years earlier. His original accountant depreciated the entire property over a 39-year life, which increased taxable income and reduced cash flow. The result was that startup expenses weren’t managed as well as they could have been.

Approach & Solution

At Hart Vida & Partners, it’s about maximizing cash flow. It’s about knowing the IRS tax code and finding flexibility within it. One of the key components of the firm’s FlowFirst® management model is use of the tax code to strategically avoid or defer taxes, in order to ultimately maximize cash flow.

Hart Vida & Partners worked with engineers in order to perform a cost segregation study and ascertained that the newly constructed clinic was eligible for accelerated depreciation. The depreciation of real estate value can be written off as a tax deduction, and accelerated depreciation results in larger deductions over a shorter period.

Accelerated depreciation also helps to reduce costs during a company’s startup years. By increasing deductions during the first few years of business, owners can reduce a company’s overall tax debt and have greater cash flow to channel directly toward building the business. Greater cash availability for marketing and expansion during the company’s startup years will increase its chances of being successful in its target market.

Hart Vida & Partners filed the appropriate tax forms, and began writing off the clinic ahead of schedule. As a result, cash savings in excess of $215,000 were realized by the client over the first five years.

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