The question of which buildings qualify for a cost segregation study is a common one, and the answer is surprisingly broad. Fundamentally, if a property is an income-producing investment and lands on a depreciation schedule for tax purposes, it is a candidate for cost segregation. This strategy is applicable to a vast range of real estate assets, both commercial and residential.
Qualifying Residential Properties
While many investors immediately think of large multifamily buildings or apartment complexes, qualifying properties extend far beyond these. Engineered Tax Services (ETS) conducts studies on numerous types of residential investments, including:
- Short-Term Rentals: Single-family vacation homes (beach, mountain, etc.) rented via Airbnb or Vrbo.
- Build-to-Rent: Entire communities or individual single-family homes designed specifically for rental income.
- Long-Term Rentals: Single-family houses, duplexes, and condos used as traditional rentals.
Essentially, any residential property acquired or constructed to generate income is eligible.
Qualifying Commercial Properties
On the commercial side, the possibilities encompass nearly every type of business real estate. This includes properties often overlooked for cost segregation, such as:
- Service Facilities:Gas stations, car washes, and oil change facilities.
- Logistics & Infrastructure: Industrial distribution centers and warehouses.
- Hospitality:Hotels, motels, and event venues.
The principle is simple: if the asset is an income-producing piece of real estate, a cost segregation study can accelerate the depreciation of its non-structural components and land improvements, increasing immediate cash flow.
2025 Legislative Update: 100% Bonus Depreciation
With the passage of the One Big Beautiful Bill Act (OBBBA), 100% bonus depreciation has been permanently reinstated for property acquired and placed in service after January 19, 2025. This makes cost segregation more valuable than ever, allowing you to deduct the full value of 5, 7, and 15-year assets in the very first year.
Qualifying Building Types at a Glance:
- Multifamily Residential: Apartment buildings, large complexes, and duplexes.
- Single-Family Rentals: Long-term rentals, build-to-rent, and vacation homes.
- Retail and Service: Gas stations, car washes, banks, restaurants, and retail stores.
- Industrial and Distribution: Warehouses, manufacturing plants, and distribution centers.
- Office and Professional: Medical offices, professional buildings, and general commercial spaces.
- Broad Eligibility: Any investment property placed on a depreciation schedule for tax purposes is generally eligible.
The ETS Advantage:If you have associated tax liabilities and own income-producing real estate, you likely qualify for a study. We help you move from standard depreciation to a detailed, engineering-based approach that uncovers the “money hiding in the walls.”
