Standard depreciation spreads a building's cost over 27.5 or 39 years. A cost segregation study breaks the property into its real parts — flooring, fixtures, wiring, landscaping — and depreciates the qualifying pieces over 5, 7, or 15 years instead. The result: a large deduction now, when it's worth the most, instead of decades from now.
The IRS treats a rental building as 27.5-year (residential) or 39-year (commercial) property. But much of what you bought isn't really "the building." Carpet, cabinetry, specialized electrical, appliances, fencing, sidewalks, and landscaping all wear out far faster — and the tax code lets them be depreciated on 5, 7, and 15-year schedules.
A cost segregation study is the engineering analysis that identifies and documents those components so you can depreciate them on their proper, shorter schedules. Pair that with bonus depreciation and a meaningful share of your purchase price can be deducted in the first year.
Straight-line residential depreciation: about $18,000 per year for 27.5 years. A cost segregation study that reclassifies 20–30% of the basis into short-life property, combined with current bonus depreciation, can instead produce tens of thousands of dollars in year-one deductions — the exact figure depends on the property, the study, and your tax situation.
Carpet and flooring, appliances, window treatments, decorative lighting, and specialized electrical or plumbing tied to equipment.
Certain furniture, cabinetry, and equipment that supports the operation of the property rather than the structure itself.
Sidewalks, paving, fencing, landscaping, retaining walls, and site lighting — improvements to the land that aren't the building.
A look-back (catch-up) study lets you claim the depreciation you should have taken in prior years. We file Form 3115 (Change in Accounting Method) and take a single catch-up deduction in the current year — no amended returns required.
We look at your property type, purchase price, placed-in-service date, and your income picture to confirm a study will actually move the needle for you.
We work with cost segregation engineers who inspect and document the property's components and assign them to the correct depreciation classes.
We review the completed study line by line before anything touches your return, and reconcile it with bonus depreciation and any passive activity limits.
We carry the results onto your federal and state returns — including a Form 3115 catch-up if it's a look-back study — and plan around the result.
The first consultation is free. We'll estimate the year-one benefit before you commit to a study.