[FREE GUIDE] TAX SECRETS FOR THE SELF EMPLOYED Download
[FREE GUIDE] TAX SECRETS FOR THE SELF EMPLOYED Download
Cost segregation is a powerful tool for real estate investors to reduce taxes and increase cash flow. Try our easy-to-use accelerated depreciation calculator to find out how much you could save with a cost segregation study.
What is a Cost Segregation Study? "A cost segregation study is an IRS‑recognized method for accelerating depreciation on specific parts of a property — such as flooring, lighting, wiring and landscaping — so you can claim larger tax deductions sooner By reclassifying assets into 5‑, 7‑ or 15‑year property instead of 27.5 or 39 years, investors improve near‑term cash flow and reduce their overall tax burden"
Cost segregation is one of the most powerful tax strategies available to property owners. By reclassifying building components into shorter depreciation lives—often 5, 7 or 15 years instead of 27.5 or 39 years—investors can claim larger deductions in the early years of ownership . This accelerates cash flow and lowers your tax bill dramatically. Our free cost segregation calculator helps you estimate these benefits before committing to a full engineer‑led study. Below you’ll find a step‑by‑step usage guide, examples for different property types and answers to common questions.
A cost segregation study identifies assets within a building—such as electrical systems, flooring, cabinetry, land improvements and parking lots—that can be depreciated over shorter tax lives. Instead of spreading deductions evenly over 27.5 years (residential) or 39 years (commercial), cost segregation allows you to front‑load depreciation deductions and therefore improve near‑term cash flow. Cost segregation is an IRS‑approved strategy and is especially valuable while bonus depreciation remains in effect; current law allows up to 80 % of qualifying assets to be deducted in year one.
The tool is designed for anyone who owns or is purchasing investment property. You don’t need to be a tax expert—just enter basic details and let the calculator do the heavy lifting. It’s especially useful for:
Real‑estate investors looking to boost cash flow
High‑income W‑2 earners diversifying into rental property
CPAs and tax advisors seeking quick estimates for clients
Business owners buying office or warehouse space
Anyone wanting a free estimate before paying for a full study
Cost segregation isn’t limited to skyscrapers. Our residential cost segregation calculator works for single‑family rentals, duplexes, triplexes, fourplexes, multi‑unit properties and even short‑term rentals like Airbnbs. Bonus depreciation still applies to these properties, though it phases out over time
Gather your property details – You’ll need the purchase price, the portion of the purchase price allocated to land vs. building, any major improvements, the date placed in service and your marginal federal tax rate. The more accurate these numbers, the more realistic your savings estimate.
Select the property type – Choose from options such as single‑family residential, multifamily, office, retail, industrial, self storage or specialty use. The calculator relies on pre‑built reallocation percentages based on hundreds of engineer‑led studies
Enter bonus depreciation assumptions – Current law allows a significant percentage of personal property and land improvements to be deducted in the first year. Input the applicable bonus rate (80 % for 2025). You can also override the default to model different scenarios.
Review your estimate – The calculator will show your estimated first‑year deduction, your projected depreciation over the next 15 years and how these figures compare to standard straight‑line depreciation. It also breaks down the reclassification of personal property, site improvements and real property. Focus on the immediate tax savings and total depreciation to understand the long‑term benefits
Request a full study – The online calculator provides a high‑level estimate only. To claim accelerated depreciation with the IRS, you need an engineer‑certified cost segregation report. After using the calculator, schedule a consultation to get a detailed study and fixed‑asset schedule prepared by our partner network.
Eligibility & pre‑analysis: Confirm the property qualifies (see “Ideal Candidates”) and review basic financials
Document collection: Gather purchase records, construction or renovation costs, existing depreciation schedules and any blueprints or plans
Hire a qualified provider: Select an engineering‑led firm experienced with IRS cost segregation rules
Site visit & component review: Engineers conduct an on‑site or virtual inspection to catalogue assets
Engineering report: The team categorizes components into 5‑, 7‑ and 15‑year property classes and produces an IRS‑compliant report
Implement deductions: Your CPA files Form 4562 (and Form 3115 if applicable) and applies the accelerated depreciation
While every building is unique, prior studies provide typical ranges for how much of a property can be reclassified. The table below shows example first‑year deductions using the calculator’s default reallocation percentages (18–21 % for personal property and 6–7 % for site improvements) and 80 % bonus depreciation. These are illustrative examples—not guarantees.
| Property type | Purchase price | Estimated % reclassified* | First‑year bonus deduction (80 %) | Notes |
|---|---|---|---|---|
| Single‑family rental | $500,000 | Personal property 18 %, site improvements 6 % | ≈$96,000 | About $120,000 (18% + 6% of $500k) qualifies for accelerated depreciation. At 80 % bonus, the first‑year deduction is roughly $96,000. Remaining depreciable assets continue over 5–15 years. |
| Fourplex (small multifamily) | $1,200,000 | Personal property 20 %, site improvements 7 % (midpoint of optimistic range | ≈$324,000 | Around $324k of the $360k reallocated assets can be written off in year one. Bonus depreciation enhances cash flow; the rest depreciates over 5–15 years. |
| Office building | $2,000,000 | Personal property 19 %, site improvements 6 % | ≈$400,000 | Roughly $500k qualifies for accelerated depreciation; 80 % bonus allows a first‑year deduction of ~$400k. Ideal for high‑income professionals or businesses purchasing their own building. |
| Retail/restaurant space | $3,500,000 | Personal property 21 %, site improvements 7 % | ≈$784,000 | Retail and restaurant properties often have significant fixtures and equipment eligible for 5‑ or 7‑year lives. Bonus depreciation delivers substantial first‑year write‑offs. |
*Percentages are based on “estimated reallocation” ranges observed in past studies. Actual results vary by property. Consult a professional for a precise estimate.
Many online calculators provide only generic estimates. Our tool differs because it:
Uses engineer‑backed logic and IRS guidelines to generate realistic estimates
Accounts for land vs. building allocation, property type and bonus depreciation, giving you a personalized breakdown
Covers both residential and commercial properties, including single‑family rentals, duplexes, multifamily units and short‑term rentals
Offers a gateway to a full study, connecting you with engineers and tax pros who can deliver a certified cost segregation report
Bonus depreciation allows owners to write off a large portion of qualifying property in the year it is placed in service. As of 2025, the bonus rate remains up to 80 % for eligible assets. The rate is scheduled to phase out in future years, making cost segregation more valuable sooner rather than later. Accelerating deductions can free up cash for renovations, acquisitions or paying down debt. However, bonus depreciation interacts with other tax strategies (such as the Real Estate Professional Status and Section 179 expensing). Always review your overall tax plan with a qualified advisor.
Download your results and share them with your CPA or tax advisor.
Schedule a feasibility call with our cost segregation specialists to discuss whether a full study makes sense for your property.
Review other real‑estate tax planning resources on our site:
Real Estate Professional Status – Qualify for Unlimited Losses
1031 Exchange vs. Cost Segregation – Which Strategy Yields More Savings?
Bonus Depreciation Sunset: Planning for 2025 and Beyond
Yes. Cost segregation is an IRS‑approved strategy that accelerates depreciation by reclassifying building components Studies must follow the IRS Cost Segregation Audit Technique Guide to withstand audit scrutiny
Our calculator uses reallocation percentages derived from thousands of engineering studies and industry data. It’s meant to provide a ballpark estimate, not replace a professional report. For a precise deduction schedule, request a detailed cost segregation study.
No. The calculator only asks for high‑level figures like purchase price, land allocation and property type. A full study will require more detailed documentation.
While larger buildings often yield larger tax benefits, cost segregation can make sense for properties of almost any size, including single‑family rentals and duplexes. The key is whether the tax savings outweigh the cost of the study—our calculator helps you gauge that quickly.
Yes. You can do a look‑back study and catch up missed depreciation deductions in the current tax year. This may involve filing Form 3115 (Change in Accounting Method). Consult a tax professional to ensure proper compliance.
Yes. The underlying data includes templates for a wide variety of property types—auto dealerships, gas stations, hospitals, hotels, warehouses, self‑storage facilities and more. If your building doesn’t fit a standard category, choose “Other” and consider requesting a custom proposal.
Yes. By reclassifying 20 %–40 % of a building’s cost into shorter depreciation lives, it’s common to secure six‑figure first‑year deductions, especially on properties worth $500 K+. A $1 million property, for instance, saw its first‑year deduction rise by $142,036
Most studies range from $5 K–$15 K, depending on property size and complexity. We often see first‑year tax savings that far exceed the cost, making cost segregation a high‑ROI strategy.
Properly prepared reports follow the IRS Cost Segregation Audit Techniques Guide When done by qualified engineers and tax professionals, studies are well within IRS guidelines and audit risk is minimal.
No. Residential rental properties, duplexes, fourplexes and even short‑term rentals qualify. The key factor is whether the expected tax savings outweigh the cost of the study.
Ideally, within the first year of owning or renovating a property. However, retroactive “look‑back” studies can capture missed depreciation and allow you to apply it in the current tax year
This calculator and guide are for educational purposes only. Real estate tax law is complex and continually evolving. The figures here are estimates based on current rules and typical reallocation percentages. Always consult a qualified tax professional before making financial decisions.
