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Cost Segregation Calculator
Estimate the year-one acceleration from a cost segregation study: shorter-life components (5-year personal property, 15-year land improvements) get bonus depreciation, while the building stays on the long depreciation schedule.
carpet, appliances, fixtures
land improvements
Year-one tax savings
$22,344
at 32% marginal rate
Year-one deduction (with cost seg)
$69,824
Year-one without cost seg
$16,000
Acceleration
$53,824
extra deduction in year 1
How cost segregation works
Without cost seg: building depreciates over 27.5 years (residential) or 39 years (commercial). With cost seg: a study identifies 5-year personal property (10–15% typical), 15-year land improvements (5–15% typical), and the rest stays at 27.5/39. The shorter-life components qualify for bonus depreciation.
Cost segregation studies cost $5,000–$15,000 for residential, more for commercial. The first-year tax savings often dwarfs the study cost. Best for properties over $300k where tax bracket and time horizon justify the analysis.
How to Use
- Enter property cost and the land portion (land doesn't depreciate).
- Enter the percentage of property that's 5-year personal property (often 8–15%).
- Enter 15-year land improvements percentage (often 5–15%).
- Enter current bonus depreciation rate and your marginal tax bracket.
- Compare year-one deduction with cost seg vs without — the acceleration is the value.
Frequently Asked Questions
What's a typical cost seg result?
Residential rentals: 15–25% of depreciable basis can shift to shorter-life property. Commercial: often higher. The acceleration produces 5–10× year-one deduction vs straight-line, especially with bonus depreciation in play.
When is cost seg worth the study cost?
Generally on properties over $300k, when the owner has high marginal tax rate, when bonus depreciation is in effect, and when the owner can use passive losses (active real estate professional or against passive income).
Can I do cost seg on a property I bought years ago?
Yes — through Form 3115 (change in accounting method), you can do a 'look-back' study and catch up missed depreciation in the current year. No amended returns needed.
What about depreciation recapture at sale?
Cost seg accelerates deductions but increases recapture exposure at sale. The personal property recapture rate (Section 1245) is up to 37%, vs 25% for straight-line real estate. A 1031 exchange defers both.
Related Calculators
Bonus Depreciation Calculator
First-year bonus deduction on qualifying property.
Depreciation Schedule Calculator
Track depreciation year by year.
Depreciation Calculator
Standard MACRS depreciation.
Depreciation Recapture Tax Calculator
25%+ tax owed on accumulated depreciation at sale.
1031 Exchange Calculator
Defer recapture by exchanging into another property.
Section 179 Deduction Calculator
Alternative first-year expensing method.
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