Cost Segregation Savings Estimator

Cost segregation is one of the most impactful tax strategies available to real estate investors. By reclassifying building components into shorter depreciation categories, you front-load your deductions and dramatically reduce your tax bill in the early years of ownership. When combined with bonus depreciation, the effect is even more powerful. Our cost segregation strategy page covers the full mechanics.

Without a cost segregation study, a residential rental property is depreciated over 27.5 years and a commercial property over 39 years using the straight-line method. This means you are only deducting a small fraction of the building's value each year. A cost segregation study identifies components like flooring, cabinetry, decorative lighting, landscaping, parking lots, and certain mechanical systems that qualify for 5, 7, or 15-year depreciation.

Under current tax law, property with a recovery period of 20 years or less qualifies for bonus depreciation. This means the reclassified components from your cost segregation study can be deducted in the year the property is placed in service. The One Big Beautiful Bill Act (OBBBA) permanently restored 100% bonus depreciation for property placed in service after January 19, 2025.

With 100% bonus depreciation now permanently available, there is no longer a declining phase-down creating urgency. However, acting now means you capture the full Year 1 deduction immediately. If you are considering a property purchase or already own property without a study, a cost segregation study can generate substantial savings right away.

The ROI on a cost segregation study is typically exceptional. For a $500,000 property, the study might cost $8,000 to $12,000 but generate $30,000 to $60,000 in Year 1 tax savings depending on your bracket and the bonus depreciation rate. That represents a 3x to 7x return in the first year alone, with additional savings continuing in subsequent years.

Cost segregation is especially valuable for investors who qualify for the short-term rental loophole or have Real Estate Professional Status (REPS), as these designations allow you to use the accelerated depreciation to offset active income. Without one of these classifications, the losses are generally passive and can only offset passive income.

If the numbers in this estimator look compelling for your situation, schedule a consultation to discuss whether a cost segregation study makes sense for your property. Our team works with certified cost segregation engineers to ensure your study is IRS-compliant and maximizes your deductions.