Cost segregation helps almost any income property, but the share that reclassifies into shorter lives, and the payoff, varies widely by type. Here’s where it tends to land.
See If Your Property FitsThe more a property depends on finishes, specialty systems, and site work rather than bare structure, the higher the share that reclassifies. A hotel or restaurant, full of fixtures and finishes, carries far more short-life property than a plain warehouse, which leans on land improvements. The figures below are typical illustrative ranges; your actual result is determined by the study.
Often 25–40%. Heavy FF&E, kitchens, finishes, and decorative build-out.
Often 25–35%. Specialized plumbing, electrical, and equipment build-out.
Often 20–35%. Unit finishes, appliances, and extensive site work.
Often 20–35%. Tenant improvements, signage, and parking-lot land improvements.
Often 20–30%. Finishes, dedicated systems, and interior build-out.
Often 20–35%. Significant site work and specialized components.
Often 10–20%. Less interior finish, but meaningful land improvements and specialty power.
Often 20–40%. Service equipment, specialty build-out, and site improvements.
Ranges are illustrative and vary by building, acquisition cost allocation, and construction. The reclassification for any property is determined through the study.
The larger the depreciable basis, the larger the dollars a given reclassification percentage produces.
Accelerated deductions are most valuable when you’ll hold the property, or defer gain through a 1031 exchange.
The benefit depends on being able to use the deductions, directly or against passive income, or with real estate professional status.
Purchases, ground-up construction, and substantial improvements all create the components a study reclassifies.
It comes down to basis and tax position more than square footage. We run a no-cost feasibility estimate so you can see the benefit before deciding.
Yes. Residential rental property is 27.5-year property, and the same short-life components, appliances, flooring, site work, can be reclassified.
Ground-up construction is an ideal candidate, the cost detail is available, and the study can be built into the project.
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.