Reclassify $60K of Building Into Faster Depreciation Pools

A cost segregation study uses engineering analysis to identify building components that qualify for shorter MACRS depreciation lives. Instead of treating your entire building as a single 27.5-year asset, the study separates it into distinct pools based on how each component is used and expected to wear out.

• 5-year MACRS pool: carpeting, appliances, cabinetry, decorative lighting, window treatments
• 15-year MACRS pool: parking lots, landscaping, sidewalks, fencing, outdoor lighting
• Building remaining: structural shell, roof, HVAC, electrical — depreciated over 27.5 or 39 years
• Bonus depreciation applies to 5-yr and 15-yr pools in year 1 (100% for property acquired after Jan 19, 2025 under the One Big Beautiful Bill Act)

Depreciation is a tax deduction. Taking more of it in early years — when your dollars are worth more — has a real cash value beyond the total amount. The time value of money means $1 of tax savings today is worth more than $1 in year 10.

• Year 1 acceleration often generates 3–8× the standard depreciation deduction
• Larger early deductions reduce taxable income when you're actively building your portfolio
• Bonus depreciation in year 1 can create a paper loss that offsets other passive income
• Even without bonus depreciation, MACRS pools continue accelerating the first 5–15 years

The amount reclassifiable varies significantly by property type. Residential properties with recent updates typically yield more personal property content than older, bare-bones rentals.

• Single-family residential: 10–20% personal property, 5–10% land improvements
• Small multifamily (2–4 units): 12–22% personal property, 8–12% land improvements
• Commercial/retail: 20–35% personal property, 10–20% land improvements
• Properties with recent renovations typically have higher reclassifiable percentages