Straight answers about cost segregation

When you buy commercial or rental real estate, the IRS makes you depreciate the whole building over 27.5 or 39 years. A cost segregation study takes a building apart (on paper) and identifies the pieces inside it — things like flooring, cabinetry, specialty electrical, site improvements, and land improvements — that actually qualify for 5-, 7-, or 15-year lives. Those faster lives mean bigger deductions in the early years. The study is the engineering-backed report that lets your CPA file for that acceleration.

Anyone with commercial or income-producing real estate placed in service in the last several years — or being placed in service this year. Real estate investors, medical and dental practice owners, restaurant and retail operators, industrial and manufacturing owners, hospitality, STR, multifamily, and self-storage all typically see strong results. If you have at least ~$500K of depreciable basis and taxable income to offset, a study almost always pencils.

It depends on the property type. Medical/dental, restaurant/QSR, and hospitality tend to produce the largest reclasses (often 30%–40% into 5- and 15-year life) because of the specialty finishes, equipment, and site work. Office and warehouse are more modest (often 15%–25%). The BluePrint playbook for each property type has typical ranges, and your quote will show an estimate based on your basis.

Yes, but it's phasing down. Bonus depreciation was 100% for property placed in service 2017–2022, 80% in 2023, 60% in 2024, 40% in 2025, and 20% in 2026, with a scheduled sunset in 2027 absent legislation. Property with a recovery life of 20 years or less qualifies — which is exactly what cost segregation produces (5-, 7-, and 15-year assets). Even at 40%, the Year-1 impact is meaningful; for lookbacks, you apply the bonus rate in effect when the property was placed in service.

If that happens, the accelerated deductions from your study get even bigger — the study itself doesn't change. BluePrint builds every report to pivot to whatever bonus rate applies to your placed-in-service year, so there's no rework required.

Yes. This is called a lookback study. You can claim all the missed depreciation from prior years as a single catch-up deduction in the current year — no amended returns required. Your CPA files Form 3115 (automatic accounting method change) with your next return. BluePrint prepares the Form 3115 workpaper as part of every lookback study.

There's no statute-of-limitations cutoff for Form 3115 — you can go back to the original placed-in-service year, even if that's 10+ years ago. The catch-up deduction (Section 481(a) adjustment) captures every year of under-depreciation at once.

The reclassified 5- and 15-year assets are subject to Section 1245 recapture — any depreciation claimed on those items gets taxed as ordinary income on sale, up to the gain. The building shell remains Section 1250 and keeps its capital-gains-like treatment. The net-of-recapture benefit is still almost always strongly positive, especially if you hold the property 5+ years or exchange into another property via a 1031.

No. You can cost-seg a property and still 1031-exchange it later. In a 1031, recapture is generally deferred along with the capital gain, carrying the reclassified basis forward into the replacement property. Your CPA should model this — BluePrint's report provides the schedule of accumulated depreciation by class life that they'll need.

Qualified Improvement Property — improvements made to the interior of nonresidential real property after it was first placed in service. QIP has a 15-year life and is bonus-eligible. If you've done a tenant buildout, remodel, or interior improvement on a commercial property, QIP treatment often applies and a study documents it properly.

If the average guest stay is 7 days or less and you materially participate, an STR can be treated as a nonpassive activity — meaning the losses generated by cost segregation (plus bonus) can offset W-2 and business income, not just other passive income. This is often the single biggest reason STR owners get studies done. BluePrint's STR playbook includes the material-participation tests your CPA will rely on.

If you (or your spouse) qualify as a REPS — 750+ hours and more than half of personal services in real property trades or businesses — your rental activities are nonpassive, so cost seg losses can offset ordinary income. Without REPS (and without the STR rule), losses are passive and generally only offset other passive income. Your CPA drives this analysis; we build a report that supports either treatment.

Often, yes. 179D (commercial energy-efficiency deduction) and 45L (residential energy-efficiency credit) sit alongside cost segregation and target different parts of the building. On larger or LEED-adjacent projects, we flag where these may apply and coordinate with your CPA or a specialist. The Inflation Reduction Act expanded both programs significantly.

Essentials: 5 business days. Standard: 7 business days. Premium: 10 business days. Portfolio: custom timeline based on property count. The clock starts when intake is complete (documents uploaded, site visit scheduled if applicable).

Essentials is a desktop study (documents and photos only). Standard includes a virtual walkthrough or detailed photo survey. Premium includes an in-person engineer site visit. Portfolio properties are handled based on tier and size mix. For most small properties, high-quality photos and invoices are enough to support a defensible classification.

At minimum: closing statement or construction cost summary, property address and placed-in-service date, and a set of exterior and interior photos. For new construction or renovations, invoices and drawings accelerate the study. For lookbacks, your prior depreciation schedule. The intake flow walks you through it — no surprises.

Both. We deliver the full report, Form 3115 workpaper (for lookbacks), and a CPA summary to you, and we'll coordinate directly with your CPA if you'd like us to. The CPA portal makes it easy for them to pull numbers directly into the tax software without retyping anything.

Every BluePrint study ships with it. If the IRS examines any classification in your study, the engineer who signed it responds directly — at no additional cost, for the life of the study. No upsell, no separate retainer, no exclusions. See the full guarantee for details.

Far less often than the internet would suggest. A properly documented study — classifications tied to legal basis, costs reconciled to total basis, engineer sign-off, clean workpapers — rarely draws a meaningful examination. When it does, a defensible report is short work. The worst audit outcomes come from cheap, poorly documented studies run by firms that disappear when the notice arrives.

Percentage-of-benefit pricing creates a bad incentive — stretch classifications to justify a higher fee. Flat pricing means our job is to produce the right number, not a big number. It's better for you, and it's the standard the IRS expects from a defensible engineering-based study.

On Essentials at $1,495, even modest reclasses typically produce 20×–50× ROI in Year-1 tax savings alone. On Standard at $3,495, 15×–40×. On Premium at $7,995, 10×–30×. The tax impact calculator runs your numbers in 60 seconds.