Assisted living is 39-year commercial real estate — classified by income source, not licensure. But it contains nurse call systems, clinical lighting, and kitchen infrastructure that qualify for 5-year treatment.
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Assisted living facility owners face a classification question that surprises many: their building is commercial property, not residential — regardless of the fact that people live there.
The IRS classifies property based on its primary income source, not its physical use. When 80% or more of a facility's revenue comes from rental income rather than medical services, the building is commercial real property — 39-year depreciation as the default.
But within that 39-year structure is a layer of personal property that rivals a full-service hotel: resident room flooring and specialty lighting (5-year), nurse call and monitoring systems (5-year), security and access control (5-year), and commercial kitchen equipment infrastructure (5-year).
The site work — parking lots, landscaping, accessible walkways — is 15-year land improvement property. Cost Seg America analyzes every assisted living facility individually, with careful attention to the income source classification and the clinical process systems that qualify for accelerated treatment.
These are the IRS-verified asset classes under Rev. Proc. 87-56 and supporting case law — confirmed across 16,000+ studies. Every component is documented to its correct recovery period with engineering justification, defensible under IRS examination.
Cost Seg America engineers assisted living facility cost segregation studies with specific attention to the income-source classification that determines the correct depreciation schedule, and the clinical process systems that qualify for 5-year treatment. Nurse call systems, specialized lighting, commercial kitchen infrastructure, and security systems throughout the facility are individually documented. The classification drives the analysis. The engineering produces the deduction.
The IRS publishes a 347-page Audit Technique Guide on cost segregation. It identifies Approaches 1 and 2 as the preferred methodologies. Studies priced under $2,900 recover $60,000–$150,000 less per $1 million of depreciable basis than a fully engineered study. Cost Seg America has used IRS Approaches 1 and 2 on every study for 24 years. 125+ IRS audits. Zero losses. $0 ever returned. The methodology is why.
Cost segregation is an IRS-approved engineering analysis that reclassifies components of your assisted living property from the default 39 yr straight-line depreciation schedule to three shorter recovery periods: 5-year personal property, 7-year personal property, and 15-year land improvements. Every component that qualifies for an accelerated schedule is individually identified, measured, and documented.
With 100% bonus depreciation active under OBBBA for property placed in service after January 19, 2025, every qualifying 5-year, 7-year, and 15-year component can be fully deducted in Year 1. Cost Seg America consistently recovers $60,000–$150,000 more in deductions per $1 million of depreciable basis than studies priced under $2,900.
The typical reclassification rate for assisted living is 28–40% of the depreciable basis. On a $15M property, this translates to approximately $1,661,000 in Year 1 federal income tax savings at a 37% rate. Actual results vary based on the specific property, construction type, and individual tax situation.
The One Big Beautiful Budget Act (OBBBA) restored 100% bonus depreciation for qualified property placed in service after January 19, 2025. With 100% bonus depreciation, every qualifying 5-year, 7-year, and 15-year component identified in your study is fully deductible in the year you place the property in service. Your CPA determines your eligibility based on your individual tax situation, passive activity rules, and other factors.
Yes. The IRS allows you to go back and claim deductions you never took on prior-year properties using a Form 3115 change in accounting method — without amending previous returns. The catch-up deductions are taken entirely in the current tax year. Cost Seg America applies lookback analysis as standard practice. We partner with a trusted CPA specialist who handles the Form 3115 filing.
Cost Seg America's minimum qualifying property value is $200,000. Below this threshold, the engineering cost typically exceeds the tax benefit. Above $200,000, the fee-to-benefit ratio is consistently favorable and grows substantially with property value.
Unlimited audit defense means if the IRS examines your cost segregation study — this year, five years from now, or ten years from now — Cost Seg America responds. Written responses and phone representation. No time limit. No hour cap. No additional fee. Ever.
In 24+ years and 125+ IRS audits, Cost Seg America has never lost an audit and has never returned a dollar to the IRS.
Cost Seg America doesn't just find the deductions — we document them to survive the most demanding IRS examination.