Why Site Improvement Allocation Matters
Self-storage properties typically feature extensive site improvements relative to building area. Paving, fencing, drainage, lighting, and landscaping may represent 20-35% of total property cost. Properly identifying and allocating these costs as 15-year land improvements rather than 39-year building components significantly accelerates depreciation deductions.
Site improvements are depreciable while raw land is not. The allocation between land value and land improvement costs directly affects your depreciable basis. Accurate allocation methodology protects your deductions while remaining defensible under IRS examination.
Many self-storage owners underestimate the value of site improvements when considering cost segregation. The paving required for drive access, perimeter security fencing, and extensive lighting often exceed initial expectations when properly quantified and classified.
Acquisition versus construction affects how site improvements are identified. New construction with detailed cost records allows direct allocation from contractor invoices. Acquisitions require engineering analysis to estimate land improvement value within the total purchase price.
Categories of Site Improvements in Self-Storage
Paving and circulation improvements include driveways, parking areas, loading zones, and curbing. Asphalt and concrete paving, striping, wheel stops, and speed bumps all qualify as 15-year land improvements. For drive-up facilities with extensive circulation, this category dominates site improvement value.
Perimeter and security improvements encompass fencing, gates, and access control infrastructure. Chain-link fencing, security fencing with privacy slats, entrance gates, keypads, and gate operators qualify for accelerated depreciation.
Site utilities and drainage include underground electrical service, water lines, storm drainage systems, and retention facilities. While some utility components serve buildings directly, site distribution systems and drainage qualify as land improvements.
Landscaping and exterior improvements include plantings, irrigation systems, decorative fencing, and signage. Monument signs, pylon signs, and directional signage qualify for accelerated depreciation as land improvements or personal property depending on construction.
Allocation Methods for Site Improvements
Engineering-based allocation examines actual site conditions and estimates replacement or reproduction costs for each improvement category. This approach provides defensible allocations based on observable physical assets rather than arbitrary percentages.
Construction cost allocation uses contractor invoices and project records to identify site work costs directly. For new construction, actual costs provide the most accurate basis for depreciation. Organized construction records simplify this approach.
Comparative analysis references site improvement ratios from similar self-storage properties. While less precise than direct cost allocation, comparative analysis provides reasonable estimates when detailed records are unavailable.
Documentation of allocation methodology supports audit defense. Whatever approach is used, maintaining clear records of how allocations were determined protects your position if questioned by the IRS.
How Goodlane Group Helps with Site Improvement Allocation
Goodlane Group connects self-storage owners with cost segregation firms experienced in site improvement analysis. Our network includes engineers who understand the extensive site work typical of storage facilities and how to maximize 15-year depreciation benefits.
We help gather the documentation needed for accurate site improvement allocation. Site plans, paving contracts, fencing invoices, and civil engineering records all support proper classification.
Our preliminary estimates highlight the potential value of site improvements for your specific property. This insight helps you understand expected benefits and make informed decisions about full engineering studies.
Beyond initial studies, Goodlane Group provides ongoing support as you improve and expand facilities. Paving resurfacing, security upgrades, and site additions create additional acceleration opportunities deserving proper classification.