Mixed-use buildings run on 27.5-year and 39-year schedules simultaneously. Engineering the allocation between them produces the maximum legitimate deduction.
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Mixed-use properties are among the most complex cost segregation assignments in real estate — and they produce some of the most compelling results.
The complexity stems from a fundamental IRS rule: residential property depreciates over 27.5 years; commercial property depreciates over 39 years. A mixed-use building runs on both schedules simultaneously, and the allocation between them determines the correct depreciation for every component.
Cost Seg America begins every mixed-use study with a precise allocation of costs to the residential and commercial portions — based on actual square footage, actual construction costs, and actual component placement. This is not a percentage estimate. It is engineering-based analysis.
Within each portion, the 5-year personal property and 15-year land improvement layers produce accelerated deductions on top of the base schedules. On a $10 million mixed-use building, the combined effect typically produces $1.5–2.5 million in first-year accelerated deductions.
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 mixed-use property cost segregation studies with precise allocation of costs between the residential and commercial portions before any component analysis begins. The residential and commercial floors operate on different IRS depreciation schedules. A blended estimate produces a result. A properly allocated engineering analysis produces the maximum defensible deduction. Our team separates and engineers both.
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 mixed-use property from the default straight-line depreciation schedules (27.5 yr residential, 39 yr commercial) 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 mixed-use is 20–35% of the depreciable basis. On a $10M property, this translates to approximately $880,600 in Year 1 federal income tax savings at a 37% rate. Actual results vary based on the residential-commercial allocation, 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. 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.