Services / Cost Segregation
Cost Segregation StudyAccelerate Depreciation & Reduce Taxes
A cost segregation study identifies and reclassifies building components from 39-year or 27.5-year property into 5-, 7-, and 15-year asset classes. The result? Accelerated depreciation that can increase your first-year tax deductions by 15-30% or more, freeing up cash flow for reinvestment.
Stop leaving tax savings on the table. Your commercial property is more than a building — it is an engine for depreciation-driven tax reduction.
15–30%
Typical increase in first-year tax deductions
$50K–$500K+
NPV tax savings over the first 5–10 years of ownership
10:1–20:1
Typical return on the cost of the study itself
3–4 weeks
From documentation receipt to completed study
What Is a Cost Segregation Study?
A cost segregation study is an engineering-based analysis performed by qualified professionals that breaks down a commercial or residential rental property into its individual components. Instead of depreciating the entire building over 27.5 years (residential) or 39 years (commercial), cost segregation reclassifies components like electrical systems, plumbing, flooring, cabinetry, and site improvements into shorter depreciation schedules.
This process is fully IRS-sanctioned and supported by the Modified Accelerated Cost Recovery System (MACRS) under the Tax Reform Act of 1986. When performed by qualified engineers and tax professionals in accordance with IRS guidelines (including the Audit Techniques Guide), a cost segregation study is a proven, defensible tax strategy.
Your commercial property is more than a building — it is an engine for depreciation-driven tax reduction.
Services
Key Benefits of a Cost Segregation Study
Significant Cash Flow Improvement
By accelerating depreciation deductions, you defer income taxes and keep more cash in your pocket during the early years of ownership. Many property owners see $50,000 to $500,000+ in net present value (NPV) tax savings over the first 5-10 years.
IRS-Defensible Methodology
A study performed to IRS standards — with proper engineering-based cost estimates, detailed asset classifications, and supporting documentation — stands up to audit scrutiny. We follow the IRS Cost Segregation Audit Techniques Guide to ensure full compliance.
Bonus Depreciation & Section 179 Benefits
Qualified improvement property and certain shorter-life assets may qualify for bonus depreciation or Section 179 expensing. With the 2025 bonus depreciation phase-down (scheduled to drop to 40%), now is the time to act — before these benefits shrink further.
Retrospective Application on Existing Properties
Already own a property placed in service in prior years? A look-back cost segregation study (IRS Form 3115, Change in Accounting Method) lets you capture missed depreciation in a single year without amending prior returns. This catch-up deduction can be substantial.
Higher ROI Than Almost Any Tax Strategy
Cost segregation studies typically deliver a 10:1 to 20:1 return on investment. The study itself is a fully deductible engineering cost, and the tax savings almost always exceed the study fee many times over in the first year alone.
The 2025 Bonus Depreciation Opportunity
The Tax Cuts and Jobs Act set bonus depreciation at 100% for property placed in service after September 27, 2017, through 2022. It began phasing down in 2023:
| Year Placed in Service | Bonus Depreciation % |
|---|---|
| 2023 | 80% |
| 2024 | 60% |
| 2025 | 40% |
| 2026 | 20% |
| 2027+ | 0% |
This phase-down creates urgency. A cost segregation study ensures you classify the maximum possible assets into shorter-life categories that still capture bonus depreciation. Every year you wait, the bonus percentage shrinks.
Who Should Get a Cost Segregation Study?
Cost segregation is ideal for owners of:
Commercial real estate
Office buildings, retail centers, industrial facilities, medical offices, warehouses
Multifamily residential
Apartment complexes with 4+ units
Hospitality properties
Hotels, motels, resorts
Self-storage facilities
Senior living and assisted living facilities
Tenant improvements and build-outs
Leasehold improvements made by either landlord or tenant
New construction and acquired existing properties
Minimum property value threshold: most studies deliver strong ROI on properties valued at $500,000 or more. For smaller properties, a preliminary feasibility assessment can determine whether a full study makes sense.
Process
How the Process Works
Feasibility Assessment
We review your property details, cost basis, placed-in-service date, and tax situation to confirm that a cost segregation study will deliver meaningful savings.
Engineering Analysis
Our team of construction engineers and cost estimators visits the property (or reviews construction documents for new builds) to quantify and classify every component by its appropriate MACRS life.
Tax & Allocation Report
We produce a comprehensive engineering-based report that details each asset class, cost allocation, and the resulting depreciation schedule. This report serves as your audit-ready documentation.
Tax Return Implementation
We work with your CPA or tax preparer to implement the study on your tax return, including any Form 3115 filing for look-back studies.
Ongoing Support
As you renovate, expand, or dispose of property, we provide updated analysis to ensure you continue maximizing depreciation benefits.
TimelineMost studies are completed in 3-4 weeks from documentation receipt.
Meet Jesse Lipscomb
Founder and CEO, Roadmap Tax Services
Enrolled Agent | Series 65 Financial Advisor
Most tax firms file your return and disappear. Jesse built Roadmap Tax to do the opposite. With dual expertise in tax strategy and financial advisory, Jesse works with high-income earners and business owners year-round to find savings their previous CPA never looked for. His clients do not wonder if they are overpaying. They know exactly where their money is going, what strategies are working, and what is coming next. That is what happens when your tax professional actually knows you.
The Team
Your tax advisors
A dedicated team of Enrolled Agents working with you year-round.
Sandy Kisner, EA
Tax Strategist
Sandy focuses on helping entrepreneurs and high-earning professionals reduce their tax burden and build long-term wealth. She works with small business owners, real estate professionals, physicians, investors, and brokers, delivering proactive tax planning tailored to each client. Clients rely on Sandy for clear guidance, creative problem-solving, and practical solutions that turn complex tax laws into real financial opportunities.
Alex Lazo, EA
Tax Strategist
Alex brings nearly five years of experience helping clients take control of their tax outcomes. A Point Loma Nazarene University accounting graduate, he specializes in proactive tax planning for real estate investors and self-employed business owners. Originally from San Diego, Alex is known for making complex tax concepts accessible and actionable, helping clients use the tax code as a tool for building wealth.
Questions?
Cost Segregation FAQ
Is a cost segregation study legal? Does the IRS approve of it?
Yes, cost segregation is a fully legal, IRS-sanctioned tax strategy. The IRS publishes a detailed Cost Segregation Audit Techniques Guide that outlines proper methodology. Studies performed by qualified professionals using engineering-based approaches are regularly upheld in audits. The key is using a reputable firm that follows IRS guidelines.
Can I do a cost segregation study on a property I have owned for years?
Yes. A look-back study (via IRS Form 3115, Change in Accounting Method) allows you to catch up on missed depreciation from prior years. The unclaimed depreciation from previous years can be taken in the current tax year as a Section 481(a) adjustment, often producing a large immediate deduction. No amended returns needed.
How much does a cost segregation study cost, and what is the ROI?
Study costs vary by property size and complexity but typically range from $3,000 to $30,000. Most property owners see a return of 10 to 20 times the study cost in first-year net tax savings alone. The study itself is fully deductible as a professional engineering fee.
What types of assets get reclassified through cost segregation?
Common reclassifications include: interior finishes (flooring, ceiling tiles, millwork), electrical and plumbing systems, HVAC equipment, landscaping and site improvements, parking lots, signage, specialty lighting, fire protection systems, and security systems. Each is categorized into 5-, 7-, or 15-year property.
Do I need a cost segregation study if I use bonus depreciation?
Yes, even more so. Bonus depreciation applies to assets with recovery periods of 20 years or less. A cost segregation study moves as many assets as possible into those shorter-life classes, maximizing the assets eligible for bonus depreciation. Without a study, you are leaving bonus depreciation dollars on the table.
Can a cost segregation study trigger depreciation recapture when I sell?
Cost segregation shifts the timing of depreciation but does not increase the total depreciation you claim over the full holding period. Upon sale, any depreciation claimed (whether standard or accelerated) is subject to recapture under Section 1250 at a 25% maximum rate. The time value of the early tax savings typically far outweighs the recapture cost.
Get Your Cost Segregation Study Started
Accelerate your depreciation, improve cash flow, and reduce your tax burden with a professionally engineered cost segregation study. Speak with a cost segregation specialist today.