Cost Segregation Calculator 2026
Cost segregation with 100% bonus depreciation (restored for property acquired after 19 Jan 2025): year-1 deduction and tax saved versus straight-line 27.5/39-year depreciation, study-fee payback, lower later deductions, recapture at sale and net present value over your hold.
| Depreciable basis | — |
|---|---|
| Without a study: straight-line year-1 depreciation | — |
| Reclassified components | — |
| With a study: year-1 depreciation (100% bonus on 5- and 15-year) | — |
| Extra year-1 deduction | — |
| Year-1 tax saved (cash) | — |
| Net of the study fee | — |
| Years 2+: lower annual depreciation | — |
| Net present value of the acceleration over the holding period | — |
| Recapture on sale | — |
| Return on the study fee | — |
In short
A cost segregation study reclassifies 20–40% of a building's cost from 27.5- or 39-year depreciation into 5-, 7- and 15-year property, which qualifies for 100% bonus depreciation under the 2025 law for property acquired after 19 January 2025 — so a $1.2 million depreciable basis can produce a $300,000+ first-year deduction instead of $44,000. It is a timing benefit: later deductions are smaller and the excess is recaptured on sale, and the loss is passive unless you are a real estate professional or run a short-term rental you materially participate in.
Who this is for: US real estate investors and CPAs weighing a cost segregation study on a new purchase.
Cost segregation and 100% bonus depreciation in 2026
- Standard depreciation: 27.5 years for residential rental, 39 for commercial — about 3.6% / 2.6% of the building a year.
- Cost segregation breaks the purchase into components: 5-year (carpet, cabinetry, appliances, decorative lighting, specialty wiring), 7-year (furniture, equipment) and 15-year (parking, landscaping, fencing, sidewalks, site utilities). Typically 20–30% of a residential building and 25–40% of retail, restaurants, hotels and medical buildings.
- 100% bonus depreciation — restored permanently by the 2025 law for property acquired after 19 January 2025 — lets you deduct all of those reclassified components in year one. §179 ($2,560,000 limit in 2026) can cover some components too.
- It is a timing benefit: later-year deductions are smaller and the extra depreciation is recaptured on sale (ordinary rates for 5/15-year property). The value comes from the time value of money, reinvesting the tax saved, and never selling (1031 or step-up at death).
- Who can use the loss: real estate professionals, short-term rental owners who materially participate, and anyone with other passive income; otherwise it carries forward.
See also: Rental Property Calculator.
Assumptions
- Depreciable basis = price × (1 − land %); straight-line = basis ÷ 27.5 or 39.
- Year 1 with study = 100% of reclassified 5- and 15-year components + structure ÷ life; later years = structure ÷ life.
- NPV = year-1 saving − fee − PV of the extra tax in later years − PV of extra recapture (cumulative difference × rate) at sale.
Worked example
Depreciable basis $1,200,000; straight-line would give $43,636 in year one. The study moves $180,000 to 5-year and $120,000 to 15-year property — all $300,000 deductible immediately with 100% bonus — plus $32,727 on the remaining structure: $332,727 in year one, $289,091 more than straight-line, saving about $106,964 of tax (over $100,000 net of the fee, a 1,683% return on the study). Later years deduct $32,727 instead of $43,636 (about $4,036 more tax a year), and about $190,909 of extra depreciation is recaptured at sale; the net present value over ten years is still roughly $34,000 positive at 6% — much more if the tax saved is reinvested or the property is exchanged rather than sold.
Frequently asked questions
Is bonus depreciation 100% in 2026?
Yes — the 2025 law restored 100% bonus depreciation permanently for qualified property acquired and placed in service after 19 January 2025.
Does cost segregation work on a small rental?
Yes, but the fee matters: on a $300,000 property the first-year saving might be $15,000–25,000 against a $3,000–5,000 study. It makes most sense above about $500,000 or when you can use the loss.
Can I use the loss against my salary?
Only if you are a real estate professional (750 hours, more than half your working time) or materially participate in a short-term rental; otherwise rental losses are passive and carry forward.
What happens when I sell?
The accelerated depreciation is recaptured — 5/15-year components at ordinary rates, the building at up to 25% — unless you do a 1031 exchange or hold until death.
Can I do a study on a property bought years ago?
Yes — a look-back study with Form 3115 claims the missed depreciation in the current year without amending prior returns.
Does the state allow bonus depreciation?
Many states decouple from federal bonus depreciation, so the state benefit may be smaller or spread over years.
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