A working estimator for the net benefit of a cost segregation study on a renovation, under current law.
In real estate, almost everything you own — except the land itself — can be depreciated over time: the structure, the improvements, the fixtures, the finishings, the landscaping, even embedded technology. Think of your property as a solid, sturdy glacier melting into a river of cash flow. With standard tax rules and straight-line depreciation, the glacier is one large mass; the ice melts so slowly you barely see the water move. When you apply cost segregation, the glacier breaks into distinct blocks — ones that can dissolve more rapidly, in as little as 3, 5, 7, or 15 years. These smaller shelves of ice (the finishings, the fixtures, the landscaping) melt rapidly, allowing for earlier currents of liquidity, while the core structural glacier remains to thaw slowly across a lifetime: 27.5 years for residential (including 5+ unit multifamily) and 39 years for commercial. The benefit is the present value of that acceleration, less the study fee. This tool computes both.
Four numbers decide whether a renovation clears the threshold:
A deduction-timing model. Move the sliders and watch where the curve bends.
The chart above plots cumulative deductions, the running total of how much depreciation has been taken each year. Two scenarios, one with a cost segregation study, one without. The whole story is in the shape of the gap between them.
That vertical leap is the reclassified short-life property, fully expensed under 100% bonus. The bigger the reclass share, the steeper the jump.
No cost seg study. The entire basis depreciates straight-line: one large mass, melting at the same rate every year across 27.5 or 39 years. A modest, even slope.
Cost seg was done, but no bonus depreciation applied. Short-life components follow their MACRS schedule (200% declining balance for 5-yr, 150% for 15-yr). Faster than straight-line, but no Year 1 surge — this is the pre-OBBBA, or bonus-ineligible, scenario.
Multiply that gap by your tax rate and you get the dollars cost segregation is putting back in your pocket sooner. NPV discounts it back to today.
Total deductions over the building's life are identical either way. Cost seg does not add deductions, it just moves them earlier.
If you exit before the sage line catches up, you have not actually "earned" all that acceleration. Recapture on sale claws back the 1245 portion at ordinary rates.
Basis scales the Y-axis. Reclass share sets the Y1 leap. Hold period decides whether you see the lines converge. Tax rate and discount rate change the dollar verdict, not the shape.
Cost segregation moves components out of the 27.5 or 39-year structural bucket and into shorter-lived classes. Here is a representative sample of what typically falls in each category — the exact classification depends on an engineered study and the specific property facts.