Savings Opportunities for Your Auto Dealership Remodel– February 04, 2014 by Alane Boffa

Many auto dealerships these days are putting on a fresh face, remodeling their storefronts and showrooms to remain competitive as the auto industry and our economy continue to rebound. One of the main reasons now is the time to take on such a large and costly project is because auto manufacturers are strongly encouraging dealers to do so (whether they like it or not). Many manufacturers are offering cash incentives to modernize their showrooms under various factory image plans. Each plan has unique requirements and targets that must be met for a dealer to qualify. Generally, most dealership are complying and are therefore receiving the incentives, which reduce a remodel project’s cost to the dealership.

There are a couple key strategic tax opportunities that dealerships can take advantage of in combination with manufacturer incentives to really maximize savings:

  1. InvestOhio. Under the current Ohio budget, tax credits are available for new equity investments made in Ohio companies. If structured properly, 10% of your remodel project costs can come back to you via state tax credits. Read our previous blog posts on the InvestOhio program. Already planning your remodel project? If you have yet to start paying the contractor, there may still be time to structure it under the InvestOhio rules.
  2. Cost Segregation Studies. The dealership building and its improvements are typically depreciated over 39 years. A cost segregation study helps to categorize the many aspects of the remodel into several other asset categories, which are depreciated over shorter lives. This can result in immediate tax deductions and more cash in your pocket. For dealerships that closed projects in 2013, a cost segregation study may still provide significant savings on the 2013 tax returns, if taken advantage of ASAP.

While cost segregation studies are here to stay, InvestOhio credits are only available as long as the funds set aside for the program lasts. Each manufacturer’s incentive plan has expiration dates as well, so now may be the best time to plan your dealership’s remodel.

We want to hear from you! We encourage you to share this blog post on social media or contact Alane Boffa at aboffa@cohencpa.com or Neil Kaback at nkaback@cohencpa.com for further discussion.

This communication is for information only, and any action should only be taken after a detailed review of the specific situation and appropriate consultation.

Notwithstanding that these materials do not constitute legal, accounting or other professional advice, as may be required by United States Treasury Regulations and IRS Circular 230, you should be advised that these materials are not intended or written to be used, and cannot be used by you or any other person, for the purpose of avoiding penalties that may be imposed under federal tax laws. No written statement contained in these materials may be used by any person to support the promotion or marketing of or to recommend any federal tax transaction(s) or matter(s) addressed in these materials, and any taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor with respect to any such federal tax transaction matter.