Cost segregation

A cost segregation study is an engineering study that reclassifies parts of a building into shorter recovery periods, which can speed up depreciation. We work with an engineering partner who prepares the study, and we handle how it is carried onto your tax return.

Ask us whether it makes sense for your property. Results vary, and a study is not a guarantee of savings.

How it works

• We look at whether a study makes sense for your property.
• We work with an engineering partner who prepares the study.
• We file the depreciation on your return, and we remain your point of contact.

When a catch-up applies, it is usually claimed on the current year's return as a change in accounting method, not by amending every prior year. We can review whether that applies.

Bonus depreciation

Under prior law, bonus depreciation was scheduled to fall to 40% in 2025 and 20% in 2026. The new law generally allows 100% bonus depreciation for qualifying property acquired after January 19, 2025. A cost-segregation study may increase the first-year deduction on qualifying parts of a building, subject to the depreciation rules and the limits on rental losses.

Ohio does not follow the federal bonus and Section 179 write-off in full in the same year. Part of the federal deduction is added back on the Ohio return and recovered in later years.

When it may help, and when it may not

A study can be worth a closer look if you own a rental or commercial building, you bought or improved a property recently, or you placed a building in service in an earlier year and never had a study done. It is often a weaker fit for a very small property, or if you plan to sell soon. Depreciation recapture and the limits on rental losses can reduce or erase the benefit. We can review your situation with you.

What to bring

• The closing statement and the purchase price
• Records of improvements or renovations
• Prior depreciation schedules, if you have them

You can call or text, come in, or upload documents through our Client Portal.

A few common questions

What is a cost segregation study? It is an engineering study that looks at the parts of a building and assigns shorter recovery periods to qualifying items, so those costs can be depreciated faster than the building itself.

I bought my property years ago. Is it too late? Not always. When a catch-up applies, it is usually claimed on the current year's return as a change in accounting method, not by amending every prior year. We can review whether that applies.

What happens when I sell? When you sell, depreciation you've taken can be recaptured. A cost-segregation study can mean more of that recapture is taxed as ordinary income, because more of the cost was treated as personal property. That is one reason a study may not fit if a sale is already planned.

Will it help if my rental losses are limited? If losses are limited under the passive-activity rules, a larger depreciation deduction may not help you this year. We can review that with you before you spend money on a study.

Results vary by property. A study is not a guarantee of savings. This is general information, not advice for your specific situation. Tax rules change. Call or text us if you're not sure what applies to you.