The Cost Seg Renovation Calculator

Before You Run It

What this tool actually estimates

Cost segregation reclassifies qualifying components from a 27.5- or 39-year building life into shorter 5-, 7-, or 15-year lives. The value is the present value of taking those deductions sooner, less the study fee. This estimator models timing; it is not an engineered study.

Four numbers decide whether a renovation clears the threshold:

Depreciable basis. Capitalized renovation cost, after the repair-vs-improvement split under the Tangible Property Regulations.

Reclassification share. The portion that flips to 5, 7, or 15-year property. Defaults adjust to property type; an engineered study will land higher or lower.

Marginal tax rate. Combined federal plus state. The benefit is a tax shield, so it scales linearly with the rate.

Hold horizon & discount rate. Acceleration is more valuable on longer holds at higher discount rates. Short flips compress the math toward the study fee.

Read the chart, not just the headline The result card gives a single net-present-value number, but the cumulative-deduction chart underneath is where the story actually lives. It shows where your deductions land in time, with and without a study, which is what cost segregation is fundamentally about.

The Estimator

Run your numbers

Cost segregation benefit estimator

A deduction-timing estimate. Adjust the inputs to compare when deductions arrive.

Renovation cost (depreciable basis)

$500,000

After repair-vs-improvement split. Capitalized portion only.

Property type

Sets default reclass share and 27.5 vs 39-year base life.

Placed-in-service month

Uses the mid-month convention for the building portion.

Reclassification share

27%

Combined 5, 7, and 15-year property as % of basis.

Marginal tax rate (fed + state)

37%

Effective combined rate at the deduction's value.

Hold period

7 years

Years until sale, refinance, or exit.

Discount rate

Your cost of capital or required return.

Estimated net tax benefit (NPV)

Verdict

Calculating...

Short-life basis

of basis, fully expensed yr 1

Year 1 tax benefit

accelerated deduction × rate

Study fee (estimate)

typical engineered study

Gross tax benefit (NPV)

before study fee

Fee ROI

—

net benefit / fee

Break-even basis

—

at these settings

Deductions over time

Cumulative deductions taken over your hold period

Cost seg + 100% bonus Cost seg, MACRS only (no bonus) Straight-line, no cost seg Bonus advantage

Estimates assume property eligible for 100% bonus depreciation and use the selected mid-month convention for the building portion. They do not test Section 179, mid-quarter convention, partial dispositions, recapture on sale, state conformity, AMT, or passive-loss limits. Reclassification share and study fee are estimates. For education only, not tax advice or an engineered study.

How To Read The Chart

What you are looking at

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.

↑

The coral line jumps in Year 1

That vertical leap is the reclassified short-life property, fully expensed under 100% bonus. The bigger the reclass share, the steeper the jump.

↗

The sage line — the glacier intact

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.

∼

The gold line — MACRS without bonus

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.

▭

The shaded area is your timing benefit

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.

→

The lines eventually converge

Total deductions over the building's life are identical either way. Cost seg does not add deductions, it just moves them earlier.

↺

A short hold leaves the gap open

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.

⚙

Three inputs reshape the chart

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.

The honest framing Cost segregation is a time-value-of-money play. If your hold horizon, tax rate, and basis are all healthy, the area under that gap can be substantial. If any one of them is weak, the chart will show you, the shaded region will be visibly thin, the curves will look nearly the same. Trust the picture.

Reference Guide

What lives in each depreciation bucket

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.

3-Year

Software & Tech Assets

• Qualifying small business software (§167)
• Racehorses / breeding horses (specific scenarios)
• Certain tractor units for over-the-road traction

5-Year

Personal Property & Equipment

• Appliances, carpeting, window treatments
• Cabinets, countertops (removable/non-structural)
• Computers, servers, security systems
• Laundry equipment, exercise room equipment
• EV charging stations, smart home devices
• Furniture in short-term rentals

7-Year

General Equipment

• Office furniture and fixtures
• Certain HVAC equipment (non-central, unit-specific)
• Specialty trade fixtures in retail/restaurant
• Pool equipment, commercial kitchen equipment
• Athletic equipment, point-of-sale systems

15-Year

Land Improvements

• Parking lots, paving, curbing
• Landscaping, irrigation systems, fencing
• Sidewalks, exterior lighting, signage
• Retaining walls, site drainage
• Qualified Improvement Property (QIP) — interior commercial renovations

20-Year

Site Infrastructure

• Farm buildings, grain bins, fences
• Certain municipal wastewater facilities
• Initial clearing and grading (some scenarios)

27.5-Year

Residential Structural

• Structural framing, foundation, roof
• Load-bearing walls, stairwells, elevators
• Central HVAC, plumbing, electrical (non-reclassifiable)
• Windows, exterior doors (structural)
Applies to: SFR, small multifamily, 5+ unit residential

39-Year

Commercial Structural

• Structural shell, core, and envelope
• Central building systems (structural grade)
• Elevators, escalators, fire suppression systems
• Permanent partitions, built-in millwork
Applies to: office, retail, industrial, medical, hotel

Note on land: Land itself is never depreciated — it does not wear out or get used up. When a cost segregation study is completed, the allocation explicitly excludes land value. Only improvements placed in service are depreciable.