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Cost segregation on a property you buy

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When you buy a building, most of its price is normally written off over 27.5 or 39 years. A cost segregation study, done by an engineering firm, finds the parts that wear out faster, such as fixtures, flooring, cabinets and parking lots, and moves them to much shorter lives.

With 100% bonus depreciation back for property bought after January 19, 2025, those shorter-lived parts can often be deducted in the first year. The result can be a large deduction right after you buy.

How it works

An engineering study splits a building into parts with shorter lives (fixtures, flooring, parking lots) that can be written off much faster. With 100% bonus depreciation, a large share of the price can be deducted in year one.

What makes it hold up

Risks

Low for the study itself. The losses are passive for most owners and only offset passive income unless you qualify as a real estate professional or the short-term rental rule applies. Part of the deduction is taxed back when you sell.

Questions to ask your CPA

Common questions

Is a study worth it on my property?

Studies cost money, so they make the most sense on buildings with substantial value. Ask the firm for an estimate of the deduction before you commit.

Can I use it on a property I already own?

Often yes. A study on a property you've held can catch up the depreciation you missed through a change in accounting method, usually without amending old returns.

Will the deduction offset my business income?

For most owners, rental losses are passive and offset only passive income. Qualifying as a real estate professional, or using the short-term rental rule, can change that.

What happens when I sell?

Part of the faster depreciation is taxed back on the sale. A 1031 exchange into another property can defer it.

See what this could save your family

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Education, not advice. Tax law changes and every situation is different, so confirm the details with your CPA or tax advisor before acting. This page was last checked against tax law as of October 2026, including the 2025 tax law, in October 2026.