Cost Segregation Tax Savings Calculator
Estimate first-year tax savings from reclassifying building components into shorter depreciation schedules. Investors and CPAs use it to size the benefit before commissioning a formal cost segregation study.
Last updated: September 2026
Formula below · 2 sources (CFPB, Wikipedia) · Updated Sep 2026
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About this calculator
Standard depreciation writes off a commercial building over 39 years (27.5 for residential rental). A cost segregation study reclassifies portions of the building into personal property (5- or 7-year MACRS) or land improvements (15-year MACRS). Since the One Big Beautiful Bill Act (2025), property acquired and placed in service after January 19, 2025 qualifies for permanent 100% bonus depreciation, so those reclassified components can be deducted in full in the first year. The extra first-year deduction is therefore about the reclassified amount minus the 1/39 it would have received anyway: Extra Deduction = Building Cost × (Personal Property % + Land Improvement %) × (1 − 1/39). Multiplying by your marginal tax rate gives the first-year tax savings. This is mostly a timing benefit: the deductions are taken earlier, and the extra depreciation is subject to recapture (as ordinary income for personal property) when you sell. If bonus depreciation does not apply, the first-year benefit is much smaller (about 14.3% of 7-year property and 5% of 15-year property in year one).
How to use
Say your building cost is $1,000,000 (excluding land), 15% qualifies as personal property (typical office), 10% as land improvements, and your marginal tax rate is 37%. Reclassified amount = $1,000,000 × (0.15 + 0.10) = $250,000. Extra first-year deduction with 100% bonus depreciation = $250,000 × (1 − 1/39) ≈ $243,590. Tax savings = $243,590 × 0.37 ≈ $90,128 in the first year. With the default inputs ($500,000, 25% personal property, 10% land improvements, 24%), the savings are about $40,923.
Frequently asked questions
What types of properties benefit most from a cost segregation study?
Cost segregation delivers the greatest benefit on commercial, industrial, and rental properties with a depreciable basis above roughly $500,000. Hotels, restaurants, medical offices, and retail centers tend to have a high percentage of personal property components such as specialty plumbing, electrical, and fixtures. Newer construction and recent acquisitions are ideal candidates because the full remaining basis can be reclassified. Older properties that have never had a cost seg study can still benefit via a "look-back" study filed with a catch-up deduction on a single tax return.
How much does a cost segregation study cost and when does it pay off?
A professional cost segregation study typically runs $5,000–$15,000 for a mid-size commercial property, though larger or more complex buildings can cost more. The study pays for itself when the first-year tax savings exceed the study fee — which generally happens when the depreciable basis is at least $500,000 and the owner has a meaningful marginal tax rate. This calculator lets you estimate that break-even before spending money on an engineer. The IRS requires studies to be performed by a qualified engineer or tax professional with documented methodology.
How does bonus depreciation interact with cost segregation savings?
Bonus depreciation allows you to deduct a large percentage of eligible personal property and land improvements in the year they are placed in service, rather than over 5, 7, or 15 years. When combined with cost segregation, bonus depreciation can dramatically amplify first-year deductions — in some years allowing 100% immediate write-off of all reclassified components. After phasing down from 100% in 2022 to 40% for 2025, bonus depreciation was restored to 100% permanently for property acquired and placed in service after January 19, 2025, so the acquisition date matters. Your tax advisor can layer bonus depreciation on top of cost seg results to maximize the current-year cash benefit.