Every unit in your building holds 5-year and 15-year components the IRS has never required you to depreciate over 27.5 years. Most owners have never captured them.
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Here is something most apartment investors never learn until it is too late: the IRS does not require every component of your building to depreciate at the same rate. They never have.
The 27.5-year straight-line schedule is the default — the number your accountant enters if nobody does anything different. It is not a requirement. It is what happens when no engineer has walked your building and told the IRS what is actually inside it.
A cost segregation study changes that. It is an engineering analysis — not a software estimate — that examines your property component by component and assigns each element to its correct IRS recovery period. Carpet: 5 years. Parking lot: 15 years. The building shell: 27.5 years.
On a $3 million apartment building, this typically generates $400,000–$700,000 in accelerated first-year deductions. With 100% bonus depreciation restored under the OBBBA for property placed in service after January 19, 2025, the timing advantage is as strong as it has ever been.
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 has completed more than 16,000 cost segregation studies across every residential property class. On multi-family properties, our engineering team consistently identifies 5-year personal property, 7-year equipment, and 15-year land improvements that software-based studies apply industry averages to — and miss. The arithmetic is straightforward: count every component, or leave deductions behind.
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 multi-family property from the default 27.5 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 multi-family is 20–35% of the depreciable basis. On a $3M property, this translates to approximately $264,000 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.