Own commercial or rental property? A cost segregation study moves part of a building’s cost out of 39-year (or 27.5-year) depreciation into 5, 7, and 15 year buckets, which pulls deductions forward into your next return. This screen estimates whether a study looks worth it for your property.
Based on the IRS Cost Segregation Audit Techniques Guide and published industry study benchmarks · Your numbers never leave your browser.
Why this page exists
A study costs real money, usually a few thousand dollars, and it does not make sense for every property. This page is a fast screen, not a substitute for a real feasibility review. The estimates use published industry averages, not an analysis of your building.
Important: This tool is for preliminary education only and is not tax, legal, or accounting advice.
How this check estimates your first-year deduction
A cost segregation study splits a building into parts that depreciate at different speeds. The structure itself depreciates over 27.5 years for residential rentals or 39 years for commercial property, but items like carpet, cabinetry, dedicated electrical, land improvements, and parking typically qualify for 5, 7, or 15 year schedules. Engineering firms publish the share of a building that typically moves to those faster schedules, and the share depends heavily on property type: a medical office often reclassifies around a third of its depreciable basis, while a condo rental sits closer to one seventh.
This check multiplies your depreciable basis (purchase price plus improvements, minus land) by the published reclassification range for your property type, then applies the bonus depreciation rate your purchase dates allow. For property acquired after January 19, 2025, federal law now allows 100 percent bonus depreciation permanently, which means the entire reclassified amount can usually be deducted in the first year. Older acquisitions fall under the earlier phase-down rules, and the check accounts for that using your dates. The cash value of the deduction then depends on your tax bracket.
A worked example
Say you bought a small apartment building for $1,200,000 including land, and placed it in service in November 2025. With a typical 20 percent land allocation, the depreciable basis is $960,000. Multifamily studies commonly reclassify 16.7 to 17.5 percent of that basis, or roughly $160,000 to $168,000, into 5 and 15 year property. Because the purchase date qualifies for 100 percent bonus depreciation, that entire amount is deductible in year one, compared with about $35,000 under straight-line depreciation alone. For an owner in the 32 percent bracket, that is in the neighborhood of $51,000 to $54,000 of federal tax deferred in the first year.
Who tends to be a strong candidate
- Owners of commercial buildings: offices, retail, restaurants, medical and dental space, warehouses, self-storage, and hotels.
- Residential rental investors, from single-family rentals up through large multifamily, including short-term rentals you actively operate.
- Business owners who bought the building their company operates from.
- Owners who renovated or expanded, since improvements create fresh basis to study.
- Owners who bought years ago and never had a study, thanks to the look-back rule below.
The look-back rule most owners miss
You do not need to have bought the property recently. If you have owned and depreciated a building for years, a study can still capture the difference between what you deducted and what you could have deducted, all in a single year, through an accounting method change your CPA files on Form 3115. No amended returns are involved. The catch-up amount grows with each year of ownership, which is why buildings owned for five or ten years often produce surprisingly large first-year results even without bonus depreciation.
When a study is not worth it
Honest answer: not every property justifies the fee, and this check will tell you so. The common disqualifiers, which the check screens for automatically:
- Depreciable basis under about $75,000, where the study fee eats most of the benefit.
- Your primary residence, which does not generate depreciation at all.
- Plans to sell within a few years, since depreciation on the reclassified items is recaptured at sale and a short hold can hand much of the benefit back.
- Passive investors with high non-rental income, where passive loss rules can park the deduction in a carryforward until there is passive income to absorb it. The deduction is not lost, but the cash benefit can wait, and that changes the math.
Where the numbers come from
Reclassification ranges are drawn from published engineering study results by property type. Bonus depreciation rates follow Section 168(k) of the tax code as amended in 2025, including the permanent 100 percent rate for qualifying property acquired after January 19, 2025 and the phase-down schedule for earlier acquisitions. Depreciation class lives follow the standard IRS schedules, and the look-back mechanics follow the IRS accounting method change procedures used with Form 3115. Studies ordered through this page are performed by Cost Seg Smart, an engineering-based cost segregation firm; TaxCreditCalculators earns a referral commission on those orders at no extra cost to you. Every figure on this page is a preliminary estimate to discuss with your CPA, not tax advice.