Evaluate Depreciation Acceleration in Your Property
A cost segregation study is an engineering-based analysis that reclassifies components of commercial or residential rental property into shorter depreciation categories. Instead of depreciating the entire building over 27.5 or 39 years, a properly conducted study identifies personal property (5, 7, and 15-year assets) that can be depreciated on an accelerated basis — generating significant upfront tax deductions and improving cash flow.
The IRS Cost Segregation Audit Technique Guide recognizes cost segregation as a technical classification exercise. The strength of the tax position depends on the study method, component documentation, placed-in-service records and how the accelerated deductions fit the owner's return.
How Cost Segregation Works
Our team works with qualified engineers and construction professionals to conduct a detailed analysis of your property. The study identifies building components that qualify for shorter depreciation lives under the Modified Accelerated Cost Recovery System (MACRS).
- Structural components (walls, roof, foundation) remain at 39-year or 27.5-year life
- Land improvements (parking lots, landscaping, sidewalks) reclassified to 15-year property
- Personal property (specialized electrical, plumbing, cabinetry, flooring) reclassified to 5 or 7-year property
- Qualified Improvement Property (QIP) eligible for 15-year depreciation and bonus depreciation
Who Benefits from Cost Segregation?
Cost segregation studies are valuable for property owners across a wide range of real estate types. The strategy is most impactful when the property has a significant construction or acquisition cost and the owner has sufficient taxable income to absorb the accelerated deductions.
- Commercial office buildings and retail centers
- Multi-family apartment complexes and rental properties
- Hotels, restaurants, and hospitality properties
- Industrial facilities and warehouses
- Medical and dental offices
- Self-storage and flex-space facilities
- New construction, acquisitions, and renovations
Bonus Depreciation & Section 179
Current IRS guidance under the One Big Beautiful Bill Act provides 100% bonus depreciation for many qualified assets acquired and placed in service after January 19, 2025, while also preserving election and transition rules for certain property. Cost segregation can identify components with recovery periods of 20 years or less that may qualify.
When coordinated with Section 179, passive activity limits and multi-year tax planning, cost segregation can move deductions into earlier years while keeping the filing position tied to the property's facts.
Lookback Studies
Already own property that you've been depreciating on a straight-line basis? A lookback cost segregation study allows you to capture the benefit of accelerated depreciation on previously placed-in-service property without amending prior-year returns. By filing a Form 3115 (Change in Accounting Method), you can claim the cumulative “catch-up” deduction in the current tax year — a powerful strategy for properties acquired in prior years.
Our Approach
We coordinate with qualified engineering firms to deliver comprehensive, audit-defensible cost segregation studies. Our role goes beyond simply ordering a report — we integrate the study results into your overall tax strategy, model the impact on current and future tax years, and ensure proper reporting on your returns.
- Pre-study feasibility analysis to confirm ROI before engagement
- Coordination with experienced engineering teams specializing in cost segregation
- Detailed review and quality control of the engineering report
- Integration with your annual tax preparation and multi-year planning
- Guidance on bonus depreciation elections and Section 179 optimization
- Lookback study analysis and Form 3115 filing when applicable