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Unlocking Tax Savings with Tangible Property Regulation Studies for Auto Dealerships

Auto dealerships are a unique asset-heavy business model, with extensive investments in real estate, facilities, and equipment. For dealerships looking to optimize cash flow and reduce tax liabilities, a Tangible Property Regulation (TPR) study is a valuable strategy. These studies allow dealerships to classify expenditures correctly and maximize tax benefits by adhering to IRS guidelines on capitalization versus deduction.

Why TPR Studies Are Ideal for Auto Dealerships

Significant Investment in Physical Assets

Auto dealerships often involve complex properties with showrooms, service centers, parking lots, lighting systems, and HVAC units. These facilities require ongoing maintenance, upgrades, and repairs, making dealerships an excellent candidate for TPR studies. Proper classification of these costs can unlock immediate tax benefits.

Frequent Repairs and Maintenance

Service and repair facilities within dealerships incur substantial maintenance costs for equipment, flooring, and utilities. A TPR study can help determine whether these costs can be expensed in the year they’re incurred or must be capitalized, allowing dealerships to lower their current-year taxable income.

Energy Efficiency and Sustainability Upgrades 

Many dealerships invest in energy-efficient systems, such as LED lighting or solar panels, to reduce operational costs. TPR studies ensure these upgrades are classified properly, potentially qualifying for additional tax deductions like the Section 179D deduction for energy-efficient buildings.

Regulatory Complexity

The IRS Tangible Property Regulations provide detailed guidance on how businesses should treat expenditures for acquiring, producing, or improving tangible property. For auto dealerships, the regulations’ complexity often leads to underutilization of tax savings. A specialized TPR study ensures compliance while optimizing the tax benefits.

Benefits of TPR Studies for Auto Dealerships

Increased Immediate Tax Deductions

Reclassifying routine repairs or maintenance as deductible expenses increases current-year tax savings, providing an immediate cash flow boost.

Improved Cash Flow for Reinvestment

Tax savings from TPR studies can be reinvested into inventory, employee training, or expanding facilities, driving dealership growth.

Compliance Confidence 

TPR studies provide clarity and confidence during audits, reducing the risk of disputes with the IRS over improperly classified expenditures.

Maximized Depreciation Benefits

By integrating TPR studies with cost segregation, dealerships can further accelerate depreciation, unlocking even more tax benefits. 

For multi-family property owners, tangible property regulation studies are not just an option—they are an essential tool for maximizing tax efficiency. These studies provide immediate tax savings, improve cash flow, and ensure compliance with IRS regulations. By engaging qualified professionals and conducting detailed asset reviews, property owners can unlock significant financial benefits, allowing them to reinvest in their properties and achieve long-term success in the competitive real estate market.

If you own a multi-family property and haven’t explored the advantages of TPR studies, now is the time to act. The savings and strategic insights gained from these studies can make a meaningful impact on your bottom line.

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