Estimate Your Savings
Use our free DIY calculator tool to estimate your savings from a cost segregation study
Note: This calculator tool and our DIY studies are powered by our sister brand Cost Seg EZ. We built Cost Seg EZ to enable faster, lower cost studies for simple residential properties.
Cost Segregation 101
A building isn’t just four walls and a roof. It contains many components — like carpet, cabinetry, specialty electrical, and land improvements (sidewalks, fencing) — that may qualify for shorter tax recovery periods (e.g., 5, 7, or 15 years instead of 27.5 or 39 years).
The purpose of a cost segregation study is to identify and reclassify those shorter tax life components so you can accelerate depreciation deductions and improve cash flow. Depending on the year, qualifying assets may also be eligible for bonus depreciation, which further increases your year 1 depreciation and tax savings. Check what bonus depreciation you qualify for here.
Even without bonus depreciation, simply moving items to shorter lives will increase first-year deductions compared to straight-line 27.5 or 39 year schedules.
Cost Seg Example
| Purchase price for a short term rental | $1,000,000 |
| % allocated to land (not depreciable) | 20% |
| Depreciable basis | $800,000 |
| % reclassified into shorter life categories | ~ 25% |
| Assets eligible for bonus depreciation with cost seg | ~ $200,000 |
| Year 1 tax savings with cost seg at a 37% tax rate | ~ $74,000 |
Higher depreciation → lower taxable income → improved cash flow
Note: This example is for informational purposes; actual results will depend on the specific features of your property (e.g., quality of the property, condition, year of purchase, renovation work, location, etc.).
Why Choose MVO
MVO helps real asset owners navigate the complex worlds of tax credits and incentives. Our team has 20+ years of experience performing cost segregation studies.
We are unique in the market by offering a full range of cost segregation services, from DIY studies for single-family residential properties (under our sister brandCost Seg EZ) to fully engineered studies for more complex properties and situations. We focus on delivering the highest quality reports, at a price that ensures a high ROI.
FAQs
The depreciable basis of your property is generally the purchase price less land value (which is not depreciable for tax purposes), plus any post-purchase improvements to the property.
There are a number of ways to estimate the land value, including an appraisal, using a ratio based on the property tax assessment, or researching vacant land sale comps. If you have questions, feel free to reach out to us.
Bonus depreciation has been in existence in many forms since 2001, ranging from 0% to 100% at various times. Determining your bonus depreciation percentage is a multi-step process.
When did you acquire your property (typically, this is the date the transaction closed)? This determines which tax law applies to your property.
- If before September 28, 2017: Please consult your qualified tax advisor or reach out to us with questions.
- If between September 28, 2017 and January 19, 2025: Please see the table below.
- If after January 19, 2025: The applicable bonus depreciation percentage is 100%.
If you acquired your property between September 28, 2017 - January 19, 2025, then the applicable bonus depreciation percentage is based on the date Placed in Service as follows:
| Date Placed in Service | Bonus Depreciation % |
|---|---|
| 9/28/2017 thru 12/31/2022 | 100% |
| 2023 | 80% |
| 2024 | 60% |
| 2025 | 40% |
| 2026 | 20% |
| 2027 | 0% |
Our calculator leverages over 20 years of experience to estimate the cost seg reclassification percentage for different property types. With this information, we apply the various depreciation schedules by tax category to provide an estimate of your year 1 and first 5 year depreciation compared to traditional straight line methodologies.
Ideally in the same tax year as your acquisition, construction, or renovation — but look-back studies (studies done years later) are very common and can still deliver very attractive tax savings. With a look-back study you do a catch-up without amending prior returns.
The IRS has an Audit Technique Guide, where it describes the best practices for a cost segregation report that will be accepted by the IRS during an audit. The IRS explicitly states that a cost segregation expert should conduct the study and create the report, and that significant construction and engineering experience is required (See page 35).
Cost Seg EZ is MVO's sister brand, which we built specifically to generate DIY reports for simple residential properties.
If you have a simple residential property and want to minimize your costs, then you should consider a DIY or Engineer-Reviewed report with Cost Seg EZ.
If you have done meaningful renovations, have a large or complex property, or want to save yourself time, then you should consider a Fully Engineered study with MVO.
Still have questions? We're here to help.