Published by AE Tax Advisors Team • 2025-07-25

Car Wash Property Owner Saves $78,000 Through Cost Segregation

The Client

Tony Russo purchased an express car wash property in Oklahoma City, Oklahoma for $950,000. The tunnel-style car wash generated $320,000 in annual gross revenue with net income of $145,000. Tony also earned $110,000 from a separate construction business.

The Problem

Tony's accountant was depreciating the building over 39 years at $19,500 per year, while treating the car wash equipment as separate 7-year property. However, significant infrastructure that serves the equipment -- water reclamation systems, chemical delivery piping, drainage, and the tunnel structure itself -- was being lumped into the 39-year building category.

Our Strategy

Our study focused on the unique components of car wash properties. We reclassified $95,000 into 5-year property (water reclamation systems, chemical delivery infrastructure, specialized electrical, signage), $42,000 into 7-year property (pay stations, vacuum systems, interior finishes), and $105,000 into 15-year land improvements (concrete aprons, drainage systems, queuing lanes, landscaping, lighting). Total accelerated: $242,000.

The Results

The $242,000 in accelerated depreciation eliminated Tony's tax on car wash income and offset a portion of his construction income. Year 1 savings totaled $78,000, which he used to install a new water reclamation system that reduced operating costs by $18,000 per year.

Key Takeaway

Car wash properties have substantial infrastructure that is frequently misclassified as structural. Water systems, chemical delivery piping, drainage, and concrete aprons all qualify for accelerated treatment.