Cost Segregation Studies for Real Estate Investors
Accelerate depreciation deductions and reduce your tax liability by $50,000-$500,000+ in the first year. Turn hidden tax benefits into immediate cash flow.
What is Cost Segregation?
Cost segregation is an IRS-approved tax strategy that allows real estate investors to accelerate depreciation deductions by reclassifying building components from 27.5-year (residential) or 39-year (commercial) depreciation schedules into shorter 5, 7, or 15-year categories.
Example: $2M Commercial Property
Without Cost Segregation: $51,282/year depreciation (39 years)
With Cost Segregation: $400,000+ first-year depreciation
Tax Savings (37% bracket): $148,000 in Year 1
A cost segregation study identifies and reclassifies personal property assets (carpeting, lighting, HVAC, electrical, plumbing, landscaping, etc.) that can be depreciated over 5-15 years instead of the building's standard 27.5 or 39-year schedule.
Key Benefits
Immediate Tax Savings
Accelerate depreciation deductions to reduce current year tax liability by $50,000-$500,000+
Improved Cash Flow
Lower tax bills mean more cash available for property improvements, debt reduction, or new investments
Retroactive Benefits
Can be applied to properties purchased in previous years to claim missed deductions
Portfolio Optimization
Works for commercial, multifamily, and high-value residential investment properties
Qualifying Properties
Cost segregation studies are most beneficial for properties valued at $500,000+. Common property types include:
How the Process Works
Initial Consultation
We review your property details, purchase price, and tax situation to estimate potential savings and determine if a cost segregation study makes sense.
Engineering Study
Our partner engineers conduct a detailed analysis of your property, identifying all components that qualify for accelerated depreciation (typically 30-45% of building cost).
IRS-Compliant Report
You receive a comprehensive report that meets IRS audit requirements, including detailed asset classifications and depreciation schedules.
File with Your CPA
Your CPA uses the report to file Form 3115 (change in accounting method) and claim accelerated depreciation deductions on your tax return.
Bonus Depreciation (2024 Update)
Under current tax law, you can deduct 60% of qualifying assets in Year 1 (phasing down from 100% in 2022). This means even larger first-year deductions when combined with cost segregation.
Example: $2M property with $800K in 5-15 year assets → $480K bonus depreciation in Year 1 = $177,600 tax savings (37% bracket)
Frequently Asked Questions
Disclaimer: This information is for educational purposes only and does not constitute tax advice. Consult with a qualified CPA or tax advisor to determine if cost segregation is appropriate for your specific situation. NS Funding partners with licensed engineering firms to provide cost segregation studies but does not provide tax advice.