Cost Segregation on a $2M Commercial Property: $285,000 in Accelerated Depreciation

Commercial properties depreciate over 39 years by default — making cost segregation even more impactful than for residential assets.

$285,000 Accelerated Depreciation

$105,450 Est. Year-1 Tax Savings

35x Return on Study Cost

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Property Type

Purchase Price

$105,450

Estimated Year-1 Tax Savings

$285,000

Accelerated Deductions

$2,995

Study Cost

35x

ROI on Study

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Estimates are for illustration only. Details

What This Means for a $2,000,000 Commercial Property

$2,000,000 Commercial Property property — cost segregation depreciation example

Commercial real estate investors face a longer default depreciation schedule — 39 years instead of 27.5 — which means cost segregation delivers proportionally greater acceleration. A $2M commercial property typically sees $285K reclassified into 5-year, 7-year, and 15-year MACRS classes, generating approximately $105K in first-year tax savings.

The component mix in commercial properties is often more favorable for cost segregation than residential. Office buildouts, retail tenant improvements, restaurant kitchen equipment, specialized electrical and plumbing systems, HVAC zoning, fire suppression systems, and parking lot improvements all qualify for accelerated recovery. In many commercial properties, 25-35% of the depreciable basis can be reclassified.

At $2M, the study cost of $2,995 represents a fraction of the tax benefit. Commercial investors often coordinate cost segregation timing with lease renewals, tenant improvements, or building acquisitions to maximize the tax impact in high-income years. The 100% bonus depreciation provision makes this particularly powerful — the entire reclassified amount is deductible in year one.

MACRS Depreciation Breakdown

Accelerated Depreciation by MACRS Class

$285,000 total reclassified into shorter recovery periods

5-Year Property $128,250

45%

7-Year Property $42,750

15%

15-Year Property $114,000

40%

Estimated Year-1 Tax Savings $105,450

Illustrative estimate. Final allocations vary based on property facts and report findings.

Method

Year-1 Deduction

Difference

Standard (39yr straight-line)

$38,462

—

With Cost Segregation + Bonus

$285,000

+$246,538

Estimated deduction based on typical cost segregation allocations for commercial property properties. Actual study results may vary based on property-specific analysis including age, condition, renovations, and local construction costs.

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Why Cost Segregation Works for Commercial Properties

Commercial properties depreciate over 39 years by default — significantly longer than the 27.5-year residential schedule. This longer default timeline means cost segregation delivers proportionally greater acceleration when components are reclassified into 5-year, 7-year, and 15-year MACRS classes.

The component mix in commercial properties is often more favorable for reclassification than residential. Tenant improvement buildouts, specialized electrical and plumbing systems, HVAC zoning, fire suppression systems, parking lot improvements, and signage all qualify for shorter recovery periods. In many commercial properties, 19-29% of the depreciable basis can be reclassified.

With 100% bonus depreciation, the entire reclassified amount is deductible in year one. Commercial investors often coordinate cost segregation with acquisition timing, lease renewals, or tenant improvement projects to maximize the tax impact in high-income years.

Who This Example Applies To

Commercial real estate investors and owner-operators
Office, retail, and mixed-use property owners
Investors comparing vendors for cost segregation studies
Taxpayers in the 32-37% federal bracket

Commercial property basis assumes 25% land allocation (75% depreciable). Actual land-to-building ratios vary by location and property type. Results depend on tenant improvements, building age, and mechanical system complexity.

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Compare: Commercial Property at Different Price Points

Price	Accelerated	Tax Savings	Study Cost	ROI
$2M	$285,000	$105,450	$2,995	35x
$3M	$427,500	$158,175	$2,995	53x

Compare: $2,000,000 Across Property Types

Property Type	Accelerated	Tax Savings	Study Cost	ROI
Commercial Property	$285,000	$105,450	$2,995	35x
Retail	$300,000	$111,000	$2,995	37x
Multifamily (5+)	$352,000	$130,240	$1,495	87x

Frequently Asked Questions

What is a cost segregation study? ▼

A cost segregation study is an engineering-based analysis that reclassifies components of your property into shorter IRS depreciation categories (5, 7, and 15 years) instead of the default 27.5 or 39 years. This accelerates your depreciation deductions, reducing your tax bill in the early years of ownership.

Why is cost segregation more impactful for commercial properties? ▼

Commercial properties depreciate over 39 years by default — 42% longer than the 27.5-year residential schedule. This means cost segregation provides proportionally greater acceleration: reclassifying components from 39 years to 5 years represents a 34-year speedup, compared to a 22.5-year speedup for residential properties.

Is bonus depreciation available in 2026? ▼

Yes. The One Big Beautiful Bill Act permanently restored 100% bonus depreciation for property placed in service in 2025 and beyond. This means you can deduct the full amount of accelerated depreciation identified in your cost segregation study in year one.