Cost Segregation Calculator (US)

What the cost segregation calculator does

The cost segregation calculator estimates how much a cost segregation study could save you in tax in the first year you own a property. A building is normally depreciated over 27.5 years for residential rental or 39 years for commercial real estate. A study reclassifies part of the building’s cost into shorter-life property, which can be depreciated much faster and often qualifies for bonus depreciation, moving much of the deduction into year one.

The tool compares first-year depreciation without a study and with one, then values the extra deduction at your marginal tax rate to show the first-year tax savings, so you can judge whether a study is worth paying for.

Why cost segregation matters

Depreciation lets you deduct part of a building’s cost each year even while the property rises in value, but over such long recovery periods the annual deduction is small. A study identifies components that do not have to follow the building’s long life.

Carpeting, cabinetry, specialty electrical, decorative lighting, and land improvements such as paving and landscaping can be classified as 5, 7 or 15-year property. They recover their cost over much shorter periods, and bonus depreciation can allow much of that cost to be deducted immediately, so more of the deductions fall in the early years of ownership, when the cash flow often helps most.

How the calculation works

• It applies the recovery period for your property type: residential rental or commercial.
• It computes standard first-year depreciation as the whole basis spread straight-line over that period.
• It reclassifies the share you enter into short-life property.
• It applies bonus depreciation to the reclassified part, deducting it in year one.
• It depreciates the remaining basis straight-line over the building life.
• It subtracts the two first-year figures to find the additional deduction, then multiplies by your marginal rate for the tax savings.

Enter a depreciable basis that excludes land, because land is never depreciated. If you know the assessed land value, subtract it from the purchase price first.

The role of bonus depreciation

With bonus depreciation, the reclassified short-life property can be deducted in the first year instead of over 5 to 15 years, which is where most of a study’s first-year benefit comes from. The bonus rate is stored as a parameter, because the law has changed several times in recent years.

If bonus depreciation is not available or not elected, turn it off in the advanced options. The reclassified property then depreciates over its own shorter schedule and the first-year advantage is smaller. The default assumes bonus depreciation applies, since that is the usual reason investors commission a study.

Depreciation recapture

Accelerated depreciation is mostly a timing benefit. The deductions reduce your basis, and when you sell, part of the gain attributable to depreciation can be taxed back through recapture. The calculator shows how much of the first-year depreciation may be subject to recapture.

A deduction today is still worth more than the same deduction spread over decades, and a like-kind exchange can defer recapture on a sale. Treat cost segregation as a way to bring deductions forward, not to create new ones.

What you need to enter

• The depreciable basis of the building, excluding land.
• Whether the property is residential rental or commercial.
• The share of the basis you expect a study to reclassify to short-life property.
• Your marginal tax rate.

Without a study yet, a conservative reclassification percentage gives a cautious estimate and a higher one shows the upper end. A qualified study provides the figure you would actually use on a tax return.

Reading your result

The output shows the reclassified amount, first-year depreciation with and without a study, the additional deduction, the first-year tax savings, and the depreciation that may face recapture later: a large tax saving now in exchange for a lower basis and possible recapture.

The actual reclassification percentage comes from an engineering study, and depreciation rules involve conventions and limits a professional applies. Use the result to decide whether a study is worth pursuing, confirm the details with a tax advisor, and recalculate when the law changes or you buy another property.

This is general information only and not financial or tax advice.

About This Cost Segregation Calculator

Use this cost segregation calculator to get an instant, accurate estimate. The figures follow official IRS guidance and every rate and threshold is kept up to date for 2026. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.