A cost segregation study analyzes the components of a real estate acquisition or improvement and reclassifies portions of the building basis from 27.5- or 39-year real property into shorter-life classes (5-, 7-, or 15-year property). The shorter-life classes can then be expensed under MACRS at accelerated rates and, under the One Big Beautiful Bill Act of 2025, under permanently restored 100% bonus depreciation for property acquired and placed in service after January 19, 2025. This calculator estimates the first-year tax benefit of cost segregation compared with straight-line depreciation of the entire building basis.
The calculator approximates first-year deductions as follows:
OBBBA bonus depreciation rules. The One Big Beautiful Bill Act of 2025 (Public Law 119-21, signed July 4, 2025) permanently restored 100% bonus depreciation under § 168(k) for qualified property both acquired and placed in service after January 19, 2025. The OBBBA reverses the TCJA phase-down (which would have produced 40%/20%/0% rates for 2025/2026/2027). Property acquired under a written binding contract entered into before Jan 20, 2025 generally remains subject to the TCJA phase-down rates and acquisition-date rules. The IRS issued Notice 2026-11 providing interim guidance on the OBBBA effective dates and applying existing § 1.168(k)-2 regulations with revised effective dates. Taxpayers may elect a 40% rate (or 60% for long-production-period property) in lieu of 100% for the first taxable year ending after Jan 19, 2025; that election is made on a class-of-property basis and is irrevocable.
The calculator provides an estimate. The actual benefit of a cost segregation study depends on the specific composition of the property (mechanical systems, site improvements, finishes, fixtures), the rigor of the engineering analysis, and the applicable tax rules in the year of placement-in-service. A study performed by a qualified engineer-and-tax professional team is required to support the reclassification on examination.
Important. This calculator estimates first-year benefits only. The complete economic analysis of a cost segregation study should also consider: (i) the time-value of money over the depreciation period; (ii) potential depreciation recapture under § 1245 on later disposition (which is taxed at ordinary rates rather than at capital gains rates and is recognized to the extent of boot in a like-kind exchange); (iii) the cost of the study itself, typically $5,000–$25,000 depending on property complexity; (iv) the § 469 passive activity rules, which may delay or prevent use of the additional depreciation by the taxpayer; (v) interactions with the qualified business income deduction; and (vi) the impact on alternative minimum tax for individuals and on adjusted financial-statement income for corporate alternative minimum tax. Cost segregation is not appropriate for every property or every taxpayer. A qualified study and professional review are recommended before relying on the projected benefit.
The calculations above are based on simplified assumptions. To discuss your specific situation with the firm, contact us directly.
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