Frequently asked questions about Cost Segregation
Answers to common questions regarding cost segregation.
What is cost segregation?
Cost segregation is a tax strategy that allows real estate owners to accelerate depreciation deductions by reclassifying certain parts of a property—such as flooring, lighting, or land improvements—into shorter recovery periods (5, 7, or 15 years), instead of the standard 27.5 or 39 years.
What types of properties qualify?
Any income-producing property may qualify, including:
Commercial buildings (office, retail, industrial, etc.)
Residential rental properties (multifamily, single-family rentals)
Renovated or expanded properties
Newly purchased or constructed buildings
How much can I save?
Savings vary by property type and cost, but owners can often reclassify 20–40% of their building’s cost to shorter lives. This can result in tens or even hundreds of thousands of dollars in additional first-year depreciation.
How do I know if cost segregation is right for me?
If you’ve recently purchased, constructed, or renovated a property—or if you own real estate worth over $500,000—there’s a strong chance a cost segregation study can benefit you.
Can I do a study on a property I’ve owned for years?
Yes. We can perform a lookback study and apply “catch-up” depreciation all in the current tax year, without amending past returns, using IRS Form 3115.
Is cost segregation only for large companies or real estate developers?
Not at all. While large property owners certainly benefit, cost segregation is just as powerful for small business owners, rental property investors, and entrepreneurs looking to reduce taxable income and increase cash flow.
Can I combine a cost segregation study with bonus depreciation?
Absolutely—and it’s one of the most powerful tax-saving strategies available for property owners today. Cost segregation breaks your property into components (5-, 7-, and 15-year assets) that qualify for accelerated depreciation. These shorter-life assets are eligible for bonus depreciation, which currently stands at 40% for assets placed in service in 2025, and gradually phases out through 2026–2027 .
Here’s how it works in practice:
Identify shorter-life assets via cost segregation (carpets, wiring, fixtures, etc.) that normally would be depreciated over decades.
Apply bonus depreciation to those assets—meaning you can immediately deduct 40% of their cost in 2025 eisneramper.com+15kahnlitwin.com+15warrenaverett.com+15.
Depreciate the remainder over their normal recovery period under MACRS.
Will this increase my chances of an IRS audit?
No—cost segregation is a well-established, IRS-accepted strategy. In fact, our studies are prepared in full compliance with IRS guidelines and include detailed documentation designed to withstand audit scrutiny.
How long does the process take?
Most studies are completed within 3 to 6 weeks, depending on the complexity and availability of construction documents. We’ll keep you informed every step of the way.
What do I need to provide to get started?
Typically, we’ll ask for:
Property address and type
Closing documents or construction costs
Building plans or blueprints (if available)
Recent tax returns (optional for analysis)
We can work with what you have—and we’ll guide you through the rest.
Strategic cost segregation to reduce taxes, increase cash flow, and reinvest in your future with confidence.
