Cost Segregation Studies
SEVN Advisory provides cost segregation studies for property owners and investors to identify qualifying building components that may be assigned shorter recovery periods, potentially accelerating depreciation and improving near-term after-tax cash flow.
Request a Feasibility ReviewWhat Is a Cost Segregation Study?
A cost segregation study is an engineering-based analysis that identifies building components and land improvements that may qualify for shorter tax-recovery periods. The study generally changes the timing of depreciation rather than increasing total depreciable basis.
Why Consider Cost Segregation?
Residential rental and nonresidential buildings are generally depreciated over 27.5 or 39 years. A cost segregation study identifies qualifying tangible personal property, land improvements, and other assets that may be depreciated over 5, 7, or 15 years.
- Applies to acquisitions, new construction, renovations, and eligible existing properties
- May improve the timing and present value of tax benefits
- Provides supportable asset classifications and depreciation schedules
The primary benefit is timing: total depreciable basis generally does not increase, but eligible deductions may be realized earlier.
Illustrative Depreciation Timing Example
Assumptions
$10 million depreciable nonresidential building and improvement basis, excluding land; placed in service in January 2026; 20% classified as eligible 5-, 7-, or 15-year property; 100% bonus depreciation available and elected; 30% effective tax rate.
Illustrative example only. Actual allocations, deductions, and tax outcomes depend on the property and taxpayer. Cost segregation generally accelerates depreciation timing and may affect depreciation recapture upon disposition.
How SEVN Advisory Can Help
We scope the study, analyze and classify property components, and deliver documentation that supports implementation with the client’s tax advisor.
- 01
Scope and Collect
Review the property, placed-in-service date, and tax objectives.
Collect cost records, drawings, fixed-asset data, and available site documentation.
- 02
Analyze and Classify
Evaluate building components and site improvements.
Assign depreciable basis to supportable recovery periods and reconcile classifications to source costs.
- 03
Report and Coordinate
Deliver the study, asset schedules, and depreciation-timing analysis.
Coordinate implementation with the client’s tax advisor.
Why Choose SEVN Advisory
Engineering-Based Analysis
The study evaluates building components and site improvements and reconciles supportable classifications to available source costs.
Experienced Specialists
Professionals supporting SEVN Advisory include engineers and Certified Cost Segregation Professionals. Team members have contributed to more than 2,000 cost segregation studies.
Implementation Coordination
We provide the report, asset schedules, and supporting methodology and coordinate implementation with the client’s tax advisor.
This experience reflects the collective professional background of SEVN Advisory team members, including engagements performed in prior roles and affiliations.
What You Receive
Our work provides the analysis and documentation needed to support asset classifications and implementation.
Detailed engineering-based cost segregation report
Asset-classification and basis-allocation schedules
Depreciation schedules by recovery period
Supporting methodology and source documentation
Estimated depreciation-timing comparison
Implementation coordination with the client’s tax advisor
Typical Engagement
Typically $2M+
Residential, Office, Industrial, Retail, Hospitality, Medical
Acquisitions, New Construction, Renovations
Scope Note
Tax benefits depend on the property, placed-in-service date, taxpayer eligibility, elections, taxable income, and applicable federal and state law. Clients should consult their tax advisor regarding implementation. No specific tax savings are guaranteed, and accelerated depreciation may affect depreciation recapture upon disposition.
Cost Segregation FAQs
What types of property may qualify for cost segregation?
Residential rental and nonresidential commercial properties may qualify, including acquisitions, new construction, renovations, and eligible existing properties across residential, office, industrial, retail, hospitality, and medical assets.
When should a cost segregation study be completed?
A study is often completed for the tax year the property is placed in service, though eligible existing properties may also be studied. Timing considerations should be discussed with the client’s tax advisor.
Can cost segregation be performed on a property acquired in an earlier year?
It may be possible for eligible existing properties. Whether and how prior-year depreciation may be addressed depends on the property, taxpayer facts, and applicable law, and should be evaluated with the client’s tax advisor.
Does cost segregation increase total depreciable basis?
Generally no. The primary benefit is timing: total depreciable basis generally does not increase, but eligible deductions may be realized earlier.
How does bonus depreciation affect a cost segregation study?
When available and elected, bonus depreciation may apply to qualifying shorter-life property identified in the study, which can increase deductions recognized in earlier years. Availability depends on the placed-in-service date, taxpayer eligibility, elections, and applicable federal and state law.
Does SEVN Advisory coordinate with the client’s tax advisor?
Yes. We provide the report, asset schedules, and supporting methodology and coordinate implementation with the client’s tax advisor. We do not provide individualized tax advice.
Can accelerated depreciation affect taxes when the property is sold?
It may. Accelerated depreciation may affect depreciation recapture upon disposition. The effect depends on the property, holding period, and applicable law, and should be evaluated with the client’s tax advisor.
Related Services
Accelerate Depreciation With Confidence
Identify qualifying components, understand potential depreciation timing, and prepare for implementation.
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