Is Cost Segregation Worth It for Your Property?

Cost segregation can accelerate depreciation deductions on eligible property. Start with the potential benefit, then check how it fits your tax situation and plans.

Refreshed for 2026 tax rules. Eligible short-life property acquired and placed in service after January 19, 2025 generally qualifies for 100% bonus depreciation. Acquisition timing, eligibility and elections matter. Ordering a study in 2026 does not change an older property's acquisition or placed-in-service date.

Four questions that help you find the opportunity

1. How much of the property can be depreciated?

For a purchase, start with the property's cost and subtract the supported land allocation. Land does not depreciate. Property type and actual components affect how much of the remaining basis can move to shorter recovery periods. There is no universal purchase-price cutoff that makes a study worthwhile.

Use the property assumptions for 45 property types as planning assumptions, then refine the estimate with your documents and an engineer's review. Those bands are not averages from a disclosed customer-study sample.

2. Can you use the deductions?

Yes, there are several potential paths. Our team can help you explore the options and coordinate the tax details with your CPA:

  • Rental income and other passive income: Rental losses generally offset passive income, subject to applicable limits. Unused losses can often carry forward.
  • Real estate professionals: Qualifying real estate professional status plus material participation in the rental activity can allow losses to offset nonpassive income. Status alone is not enough.
  • Qualifying short-term rentals: Average customer use of seven days or less is generally an exception to treatment as a rental activity. Material participation and other loss limits still matter before losses can offset wages. An Airbnb listing alone does not establish eligibility.
  • Other rental-loss exceptions: The active-participation rental allowance may help some owners, depending on income and other requirements. It is separate from the general ability to offset passive income.

Start with an estimate, then review the opportunity with our team and confirm with your CPA how much could reduce your tax bill now. Use that answer to compare the tax benefit you can use with the study fee.

3. Does the benefit justify the study?

Compare the extra deductions you can use, your actual tax rate and the study quote. Also consider the timing of the benefit. A projected deduction is different from a refund or cash already available to reinvest.

Smaller properties can still be worth exploring. The right question is whether the usable benefit supports the cost for your property. Review study pricing and scope before choosing.

4. How does it fit your holding plan?

A shorter hold does not automatically rule out cost segregation. Model the deductions you can use now alongside study fees and taxes on a future sale. Depreciation recapture depends on the assets and transaction; there is no single rate for everything. Refinancing alone is not a taxable sale.

State treatment can differ from federal bonus-depreciation rules. Future tax rates, suspended losses and a change in property use can also affect the value. Your CPA can compare the timing so you can compare the options.

Already filed? You may still have options

You may still have options after the tax-filing deadline. An accounting-method change using Form 3115 and a catch-up adjustment may be available for an existing property. The correct route depends on filing history and other requirements. Your CPA should choose the filing approach.

Start with your property

  1. Run a planning estimate using your address, property type and costs.
  2. Check the land allocation and other inputs against your purchase documents.
  3. Review the numbers and holding plan with our team, then confirm usable deductions and state rules with your CPA.
  4. Have an engineer review the property and compare a paid study's scope with its expected benefit.

Our team brings experience from 1,000+ studies and over $1 billion in analyzed real estate, and is trusted by top accounting firms and institutional investors. Our engineering studies cost approximately 50% of what traditional firms charge. Ask our team for a quote tailored to your property.

Explore My Property's Potential Savings

Matthew Gigantelli, cost segregation engineer and ASCSP member M009-25, personally reviews properties for the free engineer estimate, with a response in a few business days. A paid engineering study is a separate deliverable.

Sources and next steps

This guide provides general planning information. Your property's facts and applicable tax rules determine the result.