Medical gas systems, specialized ventilation, and clinical infrastructure qualify for accelerated depreciation. Most medical real estate owners have never captured them.
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A medical office building looks like standard commercial real estate from the outside. Inside, it is a highly engineered facility — and that engineering creates a cost segregation opportunity that far exceeds what a standard office building produces.
Medical gas systems — oxygen, nitrous oxide, vacuum, and compressed air — are process systems that qualify for 5-year treatment. They run through every clinical space and are not building systems in the IRS sense.
Specialized HVAC for clinical spaces, dedicated air handling units for procedure rooms, and the specialized electrical serving clinical equipment all present classification opportunities that require engineering judgment.
Medical facilities routinely produce reclassification rates of 25–38% — significantly higher than standard commercial office — because of the clinical process systems embedded in the building. These are the components that software-based studies apply averages to, while Cost Seg America engineers each one individually.
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 medical office cost segregation studies with direct analysis of clinical process systems as 5-year personal property. Medical gas systems — oxygen, nitrous oxide, vacuum, compressed air — are not building systems in the IRS sense. Nurse call infrastructure, clinical ventilation, and dedicated electrical for clinical equipment follow the same classification logic. Our engineering team documents every clinical system individually.
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 medical office 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 — not estimated from an industry average.
With 100% bonus depreciation active under the One Big Beautiful Budget Act (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 medical office is 25–38% of the depreciable basis — significantly higher than standard commercial office, driven by medical gas systems and clinical infrastructure. On an $8M property, this translates to approximately $757,760 in Year 1 federal income tax savings at a 37% rate. Actual results vary based on the specific property 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. The entire deduction lands on your return in Year 1. 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.