What it is
What is cost segregation?
A cost segregation study reclassifies 39-year (commercial) and 27.5-year (residential) property into 5-year personal property and 15-year land improvements. Electrical, plumbing, mechanical systems, site improvements, and hundreds of other components. Translating into immediate cash flow. Under the passing of the One Big Beautiful Bill, our clients can now enjoy 100% bonus depreciation and take the entire deduction in year one, significantly increasing your first-year tax savings. If you don’t need it all, no problem. You can now spread it out up to 20 years. This is one of the best tax strategies for creating TIME VALUE OF MONEY.
Terry Judge on cost segregation
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Estimate
What could a study be worth?
A rough range in ten seconds. The free savings analysis is the real number, built from your building.
Enter a purchase price to see a range.
An estimate from typical reclassification ranges by property type and the federal bonus depreciation rate for the placed-in-service date. Federal only. State taxes, passive-activity and basis limits, land value and the building itself all change the result. Not tax advice. CORE’s engineering study determines the real figure.
Why hire CORE to perform your study?
For over 20 years and thousands of studies completed, CORE has perfected the engineering process of delivering the highest quality, IRS-proof cost seg study for all of our clients. Whether you just purchased your first investment property or just constructed a $50M hotel, CORE will provide a smooth, white-glove experience along with the largest tax savings possible. During the engagement process, our team will identify and recommend additional strategies that can further impact your overall tax savings.
Key benefits
Why cost segregation?
Cash now, not over 39 years
Reclassified components depreciate over 5 and 15 years instead of 27.5 or 39. Deductions you would have waited decades for arrive in the first years you own the building, when the cash matters most.
100% bonus depreciation
For property acquired after January 19, 2025, the One Big Beautiful Bill restores 100% bonus depreciation: the entire reclassified amount in year one. Earlier acquisitions use the bonus rate for the year they were placed in service.
Audit defense included
Every CORE study is delivered audit-ready, with the engineering detail and documentation an examiner expects to see, and defense through the IRS appellate level at no additional charge.
No amended returns
A property placed in service years ago can still be studied. The catch-up deduction comes through a change in accounting method on Form 3115, so no prior return has to be amended.
Do you qualify?
This is likely a fit when
Best fitCommercial real estate owners with $500K+ depreciable basis
- The building was purchased, built, or substantially renovated
- Depreciable basis is roughly $500,000 or more
- You have taxable income the deductions can offset
- You expect to hold the property for several years
Our process
How the study runs
- 1
Engineering review of the property
CORE identifies the components that qualify for reclassification. Electrical distribution, plumbing, mechanical systems, finishes, and site improvements. Down to the level of distribution panel boards including feed wire and conduit, and interior partition walls by square foot and type.
- 2
Cost analysis of the identified items
Actual invoice costs or schedules of value are used wherever they exist. Where they do not, CORE uses generally accepted national cost estimating data such as R.S. Means or Marshall & Swift.
- 3
Allocation to MACRS asset classes
Direct costs are documented against the respective MACRS classes, including allocable soft costs, design fees, contractor overhead and profit, and general conditions, allocated proportionally rather than ignored.
- 4
Report and filing support
You receive the study and the documentation behind it. Where a change in accounting method is required, CORE prepares the Form 3115 / 481(a) adjustment.
In their words
What clients say about working with CORE
Q&A
Questions, answered
The detail behind this service, one line each until you open it.
Read the guide: Cost Segregation, Explained: The Questions Every Property Owner Asks →Won’t a cost segregation study trigger an audit?
This is the most persistent myth in the field. Cost segregation is an IRS-recognized method with its own IRS Audit Techniques Guide, and an engineering-based study documented to that standard is exactly what the IRS expects to see. Every CORE study is delivered audit-ready, and audit defense through the IRS appellate level is included at no additional charge.
I bought my building years ago. It’s too late for me.
It is not. A look-back study captures everything under-depreciated since the property was placed in service and takes it as a catch-up deduction in the current year, through a change in accounting method (Form 3115). No amended returns.
My CPA already handles my depreciation.
Your CPA manages the depreciation schedule. A cost segregation study changes what is on it. Breaking a building into its components is engineering work, which is why the IRS expects engineering-based documentation behind the reclassification. CORE works alongside your CPA, not around them.
Is my building too small for this to be worth it?
The honest threshold is roughly $500,000 in depreciable basis. Below that, the fee can outweigh the benefit. And if that is your situation, CORE will tell you so. That is exactly what the free savings analysis is for.
What happens when I sell the property?
Accelerated depreciation can be subject to recapture at sale, which is why your planned hold period is part of the analysis rather than an afterthought. The study weighs the time value of the early deductions against recapture before you commit. And a 1031 exchange can change that math again.
Isn’t this some kind of loophole?
No. Cost segregation has been IRS-approved since 1997 and is standard practice for virtually every large real estate owner. An engineered study is the compliant way to claim depreciation you are already entitled to. No more, no less.
What are Section 1245 and Section 1250 property, and why do they matter?
They are the two buckets the tax code sorts a building’s cost into. Section 1250 property is the structure itself: walls, roof, foundation and the building’s own systems, depreciated over 27.5 years for residential property or 39 years for commercial. Section 1245 property is tangible personal property and land improvements: finishes and carpet, specialty electrical and plumbing, equipment, parking and landscaping, depreciated over 5, 7 or 15 years. A cost segregation study identifies the Section 1245 property that was lumped into the building’s cost and moves it to its correct, shorter life. The Tax Court accepted this approach in Hospital Corporation of America v. Commissioner in 1997, which is why an engineering-based study is the standard way to support the split.
What does Section 168 have to do with cost segregation?
Section 168 is the depreciation law itself. It sets the recovery periods and methods (MACRS) that give 5, 7 and 15-year property their faster write-offs, and Section 168(k) is bonus depreciation, which lets the reclassified property be deducted in the first year instead of over its life. The Tax Cuts and Jobs Act set bonus depreciation at 100% for property placed in service after September 27, 2017, phased it down through 2023 and 2024, and the One Big Beautiful Bill restored 100% for property acquired and placed in service after January 19, 2025. Cost segregation is how a building owner gets the Section 168 treatment the code already allows for each component, rather than depreciating everything over 39 years.
Do residential rentals qualify?
Yes. 27.5-year residential rental property qualifies the same way. And so do short-term rentals, which depending on average stay may be treated as 39-year property. The components and percentages differ; the mechanics are identical.
What will I receive?
- A full engineered cost segregation report, audit-ready
- Asset detail by MACRS class with the cost basis behind each
- Form 3115 / 481(a) adjustment prepared where a method change applies
- 100% audit defense, through IRS appellate level, at no additional charge
What you’ll need for your study
Most of it already exists in your closing file or with your CPA. CORE tells you exactly what to send.
Purchase or construction
- Closing statement or settlement sheet
- Appraisal, if one was done
- Construction cost detail or schedule of values
- Renovation invoices and change orders
Tax records
- Current depreciation schedule
- Placed-in-service dates
- Prior-year returns for a look-back study
- Entity ownership of each property
Property information
- Address and building type
- Square footage and floor count
- Site plans or drawings, if available
- Tenant and use details
Missing something? The engineering team can work from the property itself. That is what the site visit is for.
Anything I should know before starting?
- It accelerates deductions rather than creating new ones. The benefit is the time value of taking them now instead of over decades.
- A study can be performed on a property placed in service in an earlier year without amending prior returns, using a change in accounting method.
- The first-year benefit depends on the bonus depreciation rate for the year the property was placed in service, which has changed several times.
