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.
About this calculator
Standard depreciation writes off a commercial building over 39 years or a residential rental over 27.5 years. A cost segregation study reclassifies portions of the building into personal property (5- or 7-year MACRS) or land improvements (15-year MACRS), dramatically accelerating deductions. This calculator estimates first-year savings by computing the extra depreciation gained from moving those components to faster schedules. For personal property (7-year), the accelerated first-year deduction is approximately: buildingCost × (personalProperty% ) × (1 − 1/7). For land improvements (15-year): buildingCost × (landImprovement%) × (1 − 1/15). Both figures are summed and multiplied by your marginalTaxRate to yield dollar savings. Bonus depreciation rules can amplify these savings further in eligible tax years.
How to use
Say your building cost is $1,000,000, 20% qualifies as personal property, 10% as land improvements, and your marginal tax rate is 35%. Personal property savings base = $1,000,000 × 0.20 × (1 − 1/7) = $200,000 × 0.857 = $171,429. Land improvement savings base = $1,000,000 × 0.10 × (1 − 1/15) = $100,000 × 0.933 = $93,333. Total accelerated depreciation = $171,429 + $93,333 = $264,762. Tax savings = $264,762 × 0.35 = $92,667 in the first year alone.
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. The bonus depreciation percentage has been phasing down from 100% after 2022, so the timing of your study matters. Your tax advisor can layer bonus depreciation on top of cost seg results to maximize the current-year cash benefit.