Cost Segregation Estimator

A cost segregation study is an engineering-based analysis that breaks a building down into its components and reclassifies the ones with shorter useful lives — like appliances, carpet, cabinets, landscaping, and parking — out of the standard 27.5- or 39-year schedule and into 5-, 7-, and 15-year property. Accelerating those deductions front-loads your depreciation and lowers your taxable income in the early years of ownership. This calculator gives a rough estimate, not tax advice — a licensed cost-seg specialist or CPA should run the actual study.

Bonus depreciation lets you expense a large share of qualifying short-life property (generally assets with a recovery period of 20 years or less) in the year you place it in service, which is exactly what a cost-seg study identifies. The applicable bonus percentage is set by federal law and has been phasing over recent years, so the exact rate depends on the tax year and current legislation — confirm the figure that applies to your year with a CPA rather than assuming a specific percentage.

Studies tend to pay off when the building (excluding land) is worth enough that the accelerated deductions clearly exceed the study fee, when you expect to hold the property for several years, and when you have taxable income the extra deductions can offset. For smaller residential rentals the fee can eat much of the benefit, so weigh the estimated savings against the cost. A specialist can tell you whether the numbers work for your specific property.

When you sell, the IRS "recaptures" depreciation you previously deducted and taxes it — accelerated depreciation from a cost-seg study means more recapture sooner. The benefit is largely a timing play: you defer tax now and may pay some of it back at sale, though the time value of money and potential rate differences can still leave you ahead. Because recapture and exit strategy (including a 1031 exchange) get complicated, model it with a CPA before relying on the savings shown here.