Worth for $500K property?

Marginal \u2014 $5K study to save $30K probably yes.

Retroactive cost seg available?

Yes \u2014 Form 3115 catch-up for prior years.

Partial dispositions allowed?

Yes \u2014 when replacing components.

Section 179 vs cost seg?

Different \u2014 179 caps low; cost seg unlimited.

MS Consultants, KBKG, Cost Seg Authority \u2014 IRS-respected.

Cost Segregation Study

Cost seg: reclassify 20-30% of building to 5/7/15 year MACRS. Bonus depreciation captures NPV. Study $5K-$15K for ROI 5-15x.

Purchase Price (excl land) ($)

Cost Seg Study Cost ($)

Marginal Tax Bracket %

Tax Year

Reclassified

—

Bonus Depreciation

—

Tax Saved

—

Study ROI

—

Multiple

—

Purchase (no land)	—
Study cost	—
Tax bracket	—
Year + bonus rate	—
Amount reclassified (25%)	—
Bonus depreciation	—
Tax savings Year 1	—
Net ROI	—
Multiple of study cost	—

Cost segregation studies reclassify portions of a commercial property from 39-year straight-line depreciation to 5-7-15 year accelerated MACRS lives. Combined with bonus depreciation, this front-loads massive deductions. Time-sensitive — bonus depreciation phasing to zero in 2028.

How Cost Seg Works

Engineering firm analyzes property: structural elements (39 yr), land improvements (15 yr), personal property like fixtures, carpet, lighting (5-7 yr). Typically 20-30% of building reclassifies. Then apply bonus depreciation to short-life portions — major Year 1 deduction.

2025-2028 Phase-Down

2025: 60% bonus. 2026: 40%. 2027: 20%. 2028: 0%. Doing cost seg in 2025-2027 captures dramatic Year 1 deduction; after 2027 it only spreads over 5-7 years (still good, but no front-loading). Time-sensitive window closing.

Real Estate ROI

Study cost: $5K-$15K for commercial property. Tax savings (high bracket + bonus depreciation): often $50K-$500K Year 1. ROI: 5x-50x. Best for: properties over $1M, high marginal tax bracket, owners with sufficient other income to use deduction.

Last updated May 2026. Sources: IRS Cost Segregation Guide.