Cost segregation studies
Turn one big building into decades of accelerated tax deductions.
A cost segregation study reclassifies components of your commercial or rental property from 39- or 27.5-year depreciation into 5-, 7-, and 15-year buckets — pulling deductions forward and freeing up cash today.
How it works
Cost seg is an engineering-based analysis of your building. A specialist reviews construction records, blueprints, and the property itself to identify assets that qualify for shorter recovery periods under IRS rules.
The output is a defensible report your CPA files with your return (often via Form 3115 for a look-back on properties you already own). The reclassified components generate significantly larger depreciation deductions in the early years of ownership.
For properties placed in service during bonus depreciation windows, a large share of the reclassified basis can be deducted in year one — creating a meaningful, immediate tax benefit.
You may qualify if
- You own commercial or income-producing real estate
- The building basis (excluding land) is over ~$500K
- You have taxable income to offset (or a real estate professional status pathway)
- You haven't already done a cost seg on the property
What the engagement looks like
01
Fit check
5-minute intake covers property type, cost basis, and placed-in-service date.
02
Proposal
A specialist confirms the projected benefit and quotes a fixed fee.
03
Study
Engineering review, site visit if needed, and asset reclassification.
04
Deliverable
A CPA-ready report — plus Form 3115 support for look-back years.
Case study
Southeast medical office building
Owner-occupied medical practice · Southeast US
Situation
A practice owner purchased a $10M medical office building. Their CPA was depreciating the full building basis straight-line over 39 years — leaving significant deductions on the table in the early years of ownership.
Approach
The specialist performed an engineering-based cost seg, reclassifying specialty electrical, plumbing, casework, finishes, site improvements, and land improvements into 5-, 7-, and 15-year property eligible for bonus depreciation.
Result
The study unlocked roughly $1.5M in accelerated first-year deductions, dramatically reducing the owner's current-year tax bill and freeing up cash to reinvest in the practice.
Building basis
$10M
Accelerated deduction
~$1.5M
Est. tax savings (37% fed)
~$555,000
Study fee
$23,000
Illustrative example based on typical engagement outcomes. Actual results depend on your specific facts.
Common questions
Can I do a cost seg on a property I bought years ago?
Yes. A look-back study captures missed depreciation from prior years into the current year via a Form 3115 accounting method change — no need to amend old returns.
Will this trigger recapture when I sell?
Depreciation is recaptured on sale, but the time value of the accelerated deductions almost always outweighs the recapture cost, especially if you 1031 the property.
How long does a study take?
Most engagements complete in 4–8 weeks from kickoff, depending on documentation availability and whether a site visit is required.
Ready to see if this fits?
Short intake, no cost, matched with a specialist within days.