Turn your building into a cash-flow asset. An engineering-based cost segregation study moves eligible costs out of 27.5- or 39-year depreciation and into 5-, 7- and 15-year property, putting significant tax savings back into your business now rather than decades from now.
When you buy, build or renovate a property, the IRS lets you recover its cost through depreciation. By default, the whole building is depreciated in a straight line over 39 years for commercial property or 27.5 years for residential rental property.
But a building is not one single asset. It contains carpeting, specialty electrical and plumbing, cabinetry, decorative lighting, signage, parking lots, landscaping, fencing and much more, and the tax code allows many of those components to be depreciated far faster.
A cost segregation study is a detailed engineering and tax analysis that identifies those components, assigns a supportable cost to each, and reclassifies them from real property (Section 1250) into personal property (Section 1245) and land improvements, with much shorter recovery periods.
| Asset class | Typical examples | Recovery period |
|---|---|---|
| Personal property | Carpet and removable flooring, millwork and cabinetry, dedicated electrical and plumbing, decorative lighting, appliances, security systems, signage | 5 or 7 years |
| Land improvements | Parking lots, paving, sidewalks, curbs, landscaping, site lighting, fencing, drainage, outdoor recreation areas | 15 years |
| Qualified improvement property | Eligible interior improvements to non-residential buildings made after the building was placed in service | 15 years |
| Residential rental building | Structural components of apartment and single-family rental buildings | 27.5 years |
| Non-residential building | Structural components of commercial buildings | 39 years |
Shorter recovery periods alone make a big difference, because 5-, 7- and 15-year property also uses accelerated depreciation methods rather than straight-line. Typically 20% to 40% of a building's depreciable cost can be reclassified, depending on the property type and how it is fitted out.
The One Big Beautiful Bill Act, signed July 4, 2025, permanently restored 100% bonus depreciation for qualifying property acquired after January 19, 2025. Every dollar a cost segregation study moves into 5-, 7- or 15-year property can potentially be deducted in full in the first year.
This makes cost segregation more valuable than it has been in years. The same legislation also increased the Section 179 expensing limit and introduced a new elective 100% deduction for certain newly constructed qualified production property used in manufacturing, production and refining, a significant opportunity for industrial owners. We will help you and your CPA model which combination of elections produces the best result for your situation.
Property acquired before January 20, 2025 is subject to the phase-down rules in force at the time (for example 80% for 2023 and 60% for 2024), but a study still accelerates depreciation through shorter recovery periods.
Illustrative only. Assumes the property was acquired after January 19, 2025, the owner can use the deductions (for example, not limited by passive activity rules) and simplified first-year conventions. Actual results depend on the property, the study and your tax position.
Cost segregation is generally worthwhile for property with a depreciable basis of $1 million or more, and our sweet spot is acquisitions and developments above $2 million. It works for:
Property types with the greatest savings potential:
Bought a property years ago without a study? You haven't missed out. A look-back study lets you claim all the accelerated depreciation you could have taken since the property was placed in service, in the current tax year.
This is done through an automatic change in accounting method (IRS Form 3115) with a one-time "catch-up" adjustment under Section 481(a). No amended returns are required, and IRS consent is automatic when the procedures are followed correctly. We provide the schedules your CPA needs to file it.
We estimate your likely benefit from basic property information, at no cost.
Closing statements, drawings, construction costs, appraisals and depreciation schedules.
Our engineers inspect, photograph and measure the property.
Detailed cost estimating and asset classification to IRS audit guidelines.
A detailed report with asset schedules, methodology and supporting documentation.
We work with your CPA on filing, Form 3115 and ongoing support.
Our studies follow the principles in the IRS Cost Segregation Audit Techniques Guide, which identifies a detailed, engineering-based approach as the most reliable methodology.
Send us the basics — purchase price, date placed in service and property type — and we'll return a free feasibility estimate.
Request a Free Feasibility Review