OakCostSeg
Depreciation, measured properly.
A cost segregation study looks at a building part by part. Some parts can be depreciated much faster than the building itself. The result can be larger deductions in the early years of ownership.
What cost segregation is
One building. Many lifespans.
By default, residential rental buildings are depreciated over 27.5 years and commercial buildings over 39. A study identifies the parts that qualify for shorter lives.
5–7years
Personal property
Certain fixtures, cabinetry, specialty electrical, and finishes.
15years
Land improvements
Paving, landscaping, site lighting, and exterior features.
27.5 / 39years
Building structure
The shell, roof, and core systems that remain on the standard schedule.
Who benefits
Owners with meaningful building value.
- Investors who recently bought, built, or renovated income property
- Investors who completed a 1031 exchange and acquired replacement property
- Owners of property placed in service in earlier years who never had a study
- Owners of multifamily, commercial, industrial, hospitality, and mixed-use property
A study is not right for every property. We start with a short review to see whether the numbers justify one.
Look-back studies
Own property already? You may not have missed your chance.
If you have owned a property for years without a study, a look-back study can capture the depreciation you could have taken.
The change is usually filed with Form 3115, an application to change accounting method. The catch-up amount, called a §481(a) adjustment, is generally taken in a single year. Prior returns usually do not need to be amended.
Process
Clear steps, coordinated with your CPA.
Step 1
Initial review
We look at the property, purchase price, and placed-in-service date to estimate whether a study is worthwhile.
Step 2
Engagement
Studies are quoted per property. If a study makes sense, we confirm scope and fee in writing.
Step 3
Site visit and analysis
Engineering review of plans, records, and the property itself.
Step 4
Report delivery
A detailed report your CPA can use for the return, including Form 3115 support for look-back studies.
FAQ
Cost segregation questions.
What is a cost segregation study?
An engineering-based analysis that separates a building's cost into shorter-lived parts, such as fixtures, finishes, and site improvements. Those parts can be depreciated over 5, 7, or 15 years instead of 27.5 or 39 years.
I bought my property years ago. Is it too late?
Often not. A look-back study can capture depreciation you could have claimed in earlier years. It is usually reported with Form 3115, a change in accounting method, and the catch-up amount (called a §481(a) adjustment) is taken in the current year without amending past returns.
Does cost segregation work after a 1031 exchange?
It can. The rules for replacement property are more involved because part of the basis carries over from the property you sold. We review the exchange records with your CPA before recommending a study.
Are there trade-offs?
Yes. Faster depreciation now can mean more depreciation recapture when you sell. Passive activity rules can also limit when deductions are usable. We walk through these with you and your CPA before you commit.
Request a study review
See whether a study makes sense.
Tell us about the property. We reply with a short assessment and next steps.