A cost segregation study reclassifies parts of a building into shorter depreciation lives, moving deductions years forward. With 100% bonus depreciation now permanent, the first-year impact is the largest it has been since 2017.
Request a Complimentary AnalysisWhen you buy, build, or renovate commercial or residential-rental real estate, the tax code makes you depreciate it slowly, 39 years for commercial property, 27.5 for residential rental. But much of that building isn’t really the structure. It’s carpeting, specialty electrical and plumbing, cabinetry and finishes, site paving, and landscaping, property the code lets you depreciate over 5, 7, or 15 years instead. A cost segregation study is an engineering-based analysis that identifies and reclassifies those components, so you take the deductions now rather than over decades.
The 2025 law restored 100% bonus depreciation for qualifying property placed in service after January 19, 2025, and made it permanent. Property with a recovery period of 20 years or less, exactly the 5, 7, and 15-year buckets a cost segregation study creates, can be fully deducted in the first year. That turns a study into an immediate, and often very large, first-year deduction.
Depending on the property type, roughly 20–40% of a building’s cost basis can typically be reclassified into these shorter lives. The remainder stays 39- or 27.5-year property.
Almost any income-producing property benefits, some far more than others.
High short-life content in units and site work.
Finishes, dedicated systems, and tenant improvements.
Land improvements and specialty electrical.
Among the highest reclassification, heavy FF&E and finishes.
Specialized plumbing, electrical, and build-out.
Significant site work and specialized components.
Bought or built years ago and never did a study? You’re not too late. A look-back study lets you catch up all the accelerated depreciation you could have taken, in the current year, without amending a single prior return, using an automatic accounting-method change.
The IRS favors cost segregation grounded in engineering, not rules of thumb. That’s what we deliver, from a no-cost feasibility estimate to a defensible final report, handed to your CPA with audit support behind it.
How 100% bonus, now permanent, multiplies the first-year deduction.
Learn more →Catch up missed depreciation on property you already own, no amended returns.
Learn more →Where cost segregation pays the most, and typical reclassification ranges.
Learn more →From feasibility estimate to a defensible, engineering-based report.
Learn more →This page is general information, not tax or legal advice. Depreciation results depend on the property, the taxpayer’s facts, and applicable law, and are determined through the cost segregation study in coordination with your tax advisor. Novaric does not guarantee deduction amounts or any tax outcome.