Unlock Hidden Tax Savings 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 has consistently upheld the validity of cost segregation studies when performed by qualified professionals. The Tax Cuts and Jobs Act and subsequent legislation have made this strategy even more powerful through bonus depreciation provisions, allowing eligible property components to be fully expensed in the year they are placed in service.
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
Recent tax legislation has significantly enhanced the value of cost segregation studies. With 100% bonus depreciation restored, property components with recovery periods of 20 years or less can be fully expensed in the year placed in service. This creates substantial first-year deductions that dramatically improve after-tax returns on real estate investments.
When combined with Section 179 expensing and strategic tax planning, cost segregation becomes one of the most powerful tools available to real estate investors and business property owners for managing their tax liability.
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