Depreciable building and improvement basis after excluding land
COST SEGREGATION VS REGULAR DEPRECIATION
Updated October 12, 2026 · Individual tax treatment requires CPA review
The same property basis. A different deduction timeline.
Regular depreciation generally keeps depreciable building basis on the federal residential rental or nonresidential real property schedule. Cost segregation separates supported components that may use shorter recovery periods, while the remaining building basis stays on its applicable schedule. It changes the timing of depreciation rather than creating new basis.
- ✓ Free quote before payment
- ✓ Scope confirmed in writing
- ✓ California statewide
WHY IT MATTERS
Start with the facts. Confirm the scope.
Start by excluding land and confirming when the property was placed in service. Under a regular schedule, most building basis remains in the long lived real property class. A cost segregation study documents components that may belong in shorter property classes and produces schedules for the CPA. Eligible shorter life property may also qualify for bonus depreciation under the rules for its placed in service date. The result can be a larger federal Year 1 deduction, but passive activity, basis, at risk, California and other return level rules still determine the usable tax effect.
Plain English: you are not creating a new deduction. You are identifying when supported pieces of the property may be depreciated.
Primary guidance: IRS Publication 946: basis, property classes and recovery periods · IRS Publication 527: residential rental depreciation · California 2025 Form 3885A instructions: state depreciation adjustments
YEAR 1 COMPARISON
Regular depreciation versus accelerated depreciation.
Regular schedule: the calculator estimates Year 1 federal depreciation using the building recovery period and placed-in-service assumptions shown with the result.
With cost segregation: the same calculator applies its approved shorter-life allocation and federal bonus-depreciation assumptions, then shows the extra estimated Year 1 deduction and tax savings. Move the inputs below to compare both paths; the result is a planning estimate, not a customer fact or guaranteed deduction.
Usability check: The calculator compares estimated federal Year 1 tax savings under one regular schedule and one accelerated scenario. It does not establish the actual land allocation, component classifications, placed in service rules, California schedule or deduction usability for your return.
FREE SAVINGS CALCULATOR
How much more could you save in Year 1?
Move the sliders. See the difference. Get a free quote.
Cost segregation helps you deduct eligible property costs sooner. That may lower your taxes now. Choose your property type, purchase price and federal tax rate to compare estimated Year 1 tax savings. No email or payment needed.
An engineering based study reviews property records, components and supporting cost estimates to prepare depreciation schedules your CPA can use. This calculator gives a first look using broad property assumptions; the completed study refines your results.
Extra Year 1 tax savings
$50,280Estimated additional federal tax savings from cost segregation.
Compare Year 1 tax savings
Without cost segEstimated federal tax savings$11,347
With cost segEstimated federal tax savings$61,627
Your estimated study fee$3,995
Estimated standard remote study fee. We confirm records, scope and final price before payment.
No payment or card required to get started.
Estimate only. Assumes eligible property and deductions you can use. Actual results vary.
How it’s calculated
$61,627 with cost seg − $11,347 without = $50,280 extra tax savings. Figures are rounded to whole dollars so the comparison adds up.
The underlying Year 1 deductions are $30,667 without a study and $166,560 with a study. Multiply each deduction by your 37% federal tax rate to estimate the tax savings shown above.
Assumes 20% land, 16% of the building assigned to shorter life assets, and 100% federal bonus depreciation on eligible assets acquired and first used after January 19, 2025. The comparison uses a January start and 27.5 year building depreciation. The treatment of short term rentals depends on actual use.
Extra tax savings means the extra deduction multiplied by your 37% federal tax rate. This moves deductions forward; it does not increase the total cost you can deduct. State taxes, study fees and taxes on a later sale are excluded. Your CPA confirms the actual treatment and usable deductions.
IRS depreciation guidanceWHAT WE REVIEW
Facts needed for an honest comparison
Residential rental or nonresidential property treatment
Acquisition and placed in service dates
Current federal and California depreciation schedules
Separately scheduled furniture, equipment and improvements
CPA review of eligibility and currently usable deductions
DOES IT FIT?
Strong candidates usually have four things.
✓
The property is used for rental or business income
✓
Building and improvement basis can be supported
✓
Property records can support component classifications
✓
Earlier deductions fit the owner’s tax and holding plan
PORTFOLIO PROPOSALS
More properties. One prioritized scope.
Group shared records, similar property types and inspection needs into a written rollout plan.
2–4 propertiesGrouped scope5–9 propertiesPrioritized rollout10+ propertiesMaster proposal
STRAIGHT ANSWERS
Frequently asked questions.
What is the difference between regular depreciation and cost segregation?+
Regular depreciation spreads building deductions over many years. Cost segregation identifies parts that qualify for shorter schedules and, when eligible, bonus depreciation. The calculator compares estimated Year 1 federal tax savings both ways.
Does cost segregation replace regular depreciation?+
No. The portion that remains classified as the building generally stays on its regular real property schedule. A study identifies supported components that may use shorter recovery periods and provides schedules for your CPA to apply.
Why can the cost segregation Year 1 estimate be higher?+
Supported components may use shorter recovery periods and may qualify for bonus depreciation under the rules for their placed in service date. That can move more depreciation into Year 1, but your CPA must confirm eligibility and how much you can use.
What stays on the 27.5 or 39 year schedule after cost segregation?+
The supported basis that remains classified as residential rental or nonresidential real property generally stays on the applicable building recovery schedule. Land is excluded, and shorter life components follow their supported classifications.
Does cost segregation change the value assigned to land?+
No. Land is not depreciable and must be excluded from depreciable basis before comparing regular and accelerated schedules. A study does not turn land into depreciable property.
Does cost segregation create more total depreciation?+
No. It generally changes when eligible depreciation is claimed by moving supported basis into shorter recovery periods. Earlier deductions can improve timing, but later depreciation and potential sale consequences still matter.
AUTHORITATIVE SOURCES
Primary tax references.
Tax rules and procedures can change. These links are general references, not approval of a taxpayer’s position. Your CPA should confirm the law that applies to your acquisition date, placed-in-service date and return.
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