Cost Segregation Study

Cost Segregation is a tax planning strategy that breaks down a building’s components into different asset classes with varying depreciation periods. Instead of depreciating the entire property over 27.5 (residential) or 39 (commercial) years, cost segregation identifies components such as lighting, flooring, permanent fixtures, or landscaping that can be depreciated over shorter time frames, usually 5, 7, or 15 years. By accelerating depreciation, property owners can claim more deductions in the earlier years of ownership, which reduces taxable income.

Because most investors hold commercial properties for 10 years or less, this is a significant advantage. Making it possible to extract as much as 30 percent of a building’s value during the accelerated depreciation period. Which property types work best for a cost segregation? We explain.

What is Bonus Depreciation?

Bonus Depreciation is a tax provision that allows businesses to deduct a large percentage of an asset’s cost in the year it is first used in service, rather than spreading the deduction over its entire useful life. Under the Tax Cuts and Jobs Act (TCJA) of 2017, 100% Bonus Depreciation was introduced for qualifying assets placed in service between 2017 and 2022. This meant that assets with useful lives of 20 years or less could be fully depreciated in the first year. The bonus depreciation rate began phasing down in 2023, with the rate decreasing 20% each year until it was originally to be slated to fully phase out by 2027. The 2025 Congressional tax bill permanently reinstated 100% bonus depreciation for properties acquired and placed in service after January 19, 2025.

Why Criterium Engineers?

According to the IRS, a study by a construction engineer is more reliable than one conducted by someone with no engineering or construction background. Criterium Engineers is one of the few consulting engineering firms with the expertise to do it. Our engineers focus on both the structural components of a building and the numbers that inform the tax implications to help inform decisions.

If you have recently acquired a commercial property or planning any renovations or expansions on an existing property in your portfolio, a Cost Segregation Study will help maximize the return on your investment. See how Criterium Engineers can help you succeed by filling out the form below or contacting us at: 800-242-1969.