5 Cost Segregation Examples: 4 Benchmark Runs and 1 Delivered Study

Office / Warehouse: $330,674 on a $1,911,675 basis

This benchmark run reclassified components inside a $1,911,675 building basis (land value already excluded), producing $330,674 in first-year increased deductions, meaning the section 481(a) catch-up plus year-one increased depreciation combined. The fee used for the ratio was $9,900, a 33.4 to 1 ratio of deductions to fee.

An office/warehouse mix like this typically sits in the middle of the property-type range: enough carpet, lighting, and electrical serving equipment to generate a real 5-year bucket, plus site improvements like paving and outdoor lighting at 15 years, but without the dense finish-out of a restaurant or medical build-out. First-year deductions here worked out to about 17.3% of building basis, in line with the 16 to 21% range these four benchmark runs show. That percentage is the mechanical output of a fairly ordinary mix of components: enough personal property and site work to matter, without an unusual concentration of any single category the way a restaurant or a heavily paved site would show.

Medical Clinic: $241,839 on a $1,404,500 basis

A medical clinic benchmark run, with a $1,404,500 building basis, produced $241,839 in first-year increased deductions against a $10,000 fee, a 24.2 to 1 ratio, the most conservative multiple of the four commercial benchmarks. Medical space often carries specialized electrical, plumbing, and built-in casework tied to clinical use, which a study prices as separately classifiable components rather than folding them into the 39-year shell by default.

The 24.2 to 1 ratio here is a reminder that the deductions-to-fee multiple moves with both the size of the basis and the fee it is set against, not with property type alone. A smaller basis at a comparable fee produces a lower ratio even when first-year deductions as a share of basis, about 17.2% here, sit right in line with the other three commercial benchmark runs.

Mid-Rise Office: $479,220 on a $2,971,345 basis

The largest basis in this set, $2,971,345, produced $479,220 in first-year increased deductions at a $12,000 fee, a 39.9 to 1 ratio. Larger buildings often carry more linear feet of paving, site utilities, fencing, and outdoor lighting, the 15-year land improvement bucket, simply because there is more site to work with, which can push the reclassified share up even on a fairly standard office building.

At about 16.1% of basis in first-year deductions, this run came in lowest of the four, a reminder that a bigger building does not automatically mean a bigger percentage, even though it usually means bigger absolute dollars. The $479,220 figure is the second-largest first-year number across the four commercial examples here, behind the restaurant's $599,678, a reminder that scale alone, a bigger square footage, a bigger price tag, still produces a meaningful result even without a high-reclassification property type behind it.

Free-Standing Restaurant: $599,678 on a $2,804,440 basis

The restaurant produced both the largest first-year deduction and the strongest ratio of the four commercial examples: $599,678 in first-year increased deductions on a $2,804,440 basis, against a $9,000 fee, a 66.6 to 1 ratio. First-year deductions came to about 21.4% of basis here, the highest of the four, which lines up with the general pattern that restaurants and other finish-heavy interiors run at the high end of the 15 to 35% range a study typically finds.

Kitchen equipment, specialized ventilation, decorative lighting, and dense interior finish work all land in the faster-schedule buckets a study identifies, which is exactly why a restaurant build-out tends to outperform a simple shell on both the percentage reclassified and the resulting ratio.

Montgomery County, PA Single-Family Rental: roughly 135 to 1

The residential case in this set is a single-family rental in Montgomery County, Pennsylvania, built in 2013, 4,946 square feet (never printed with a street address). The depreciable basis was $1,040,000. The study identified $160,242 of that basis, 15.4%, into faster schedules, producing an estimated $174,905 in first-year depreciation, 16.8% of basis, including 100% bonus. The fee was $1,295, producing roughly a 135 to 1 first-year-deductions-to-fee ratio.

That ratio comes from a much smaller fee than any commercial engagement, paired with a percentage-of-basis result, 16.8%, that sits squarely in the same range the commercial benchmarks above show. The dollar total is far smaller than a commercial building's, but the multiple against the fee is dramatically larger, which is the honest way to describe the residential-versus-commercial comparison: smaller multiple, far bigger dollars for the large commercial runs; smaller dollars, a bigger multiple for this one residential rental.

What these five numbers do, and do not, tell you

Every one of these figures is specific to its building, its acquisition timing, and its fee: four are benchmark runs and one is a delivered study. None of them is a promise about what another property, even a similar one, will produce. A building's actual basis, its land-to-building split, its property type, and its acquisition date (which sets the applicable bonus depreciation rate) all move the answer independently, as walked through in how the estimate is actually built.

What the five together do show: our four commercial benchmark runs came in from about 24 to 1 up to nearly 67 to 1 in deductions to fee, and the one delivered short-term rental study, at a lower fee, ran 135 to 1. What stays consistent across all five, commercial and residential alike, is the underlying share of basis a study reclassifies, generally landing somewhere in that 15 to 35% band; what changes is the fee charged against that result and the absolute dollar size of the building itself. See how a CPA reviews the study behind these numbers and the glossary for any term used above that needs unpacking.

Frequently asked questions

Are these five examples typical, or are they the best cases you have?

Four are benchmark runs and one is a delivered study. They are examples, not averages, and the delivered study is one result, not a typical one. First-year deductions on the four commercial benchmark runs ran 16 to 21% of building basis, and the delivered rental study came in at 16.8%.

Why is the residential example's ratio so much higher than the commercial ones?

Residential and short-term rental studies are priced at a much lower fee than commercial engagements, so even a smaller absolute deduction produces a far larger multiple against that fee. First-year deductions as a share of basis, 16.8% in this case (15.4% of basis reclassified), are in line with the commercial examples; it's the fee side of the ratio that differs.

Will my property produce a similar percentage of basis reclassified?

It depends on property type, age, and finish level. Restaurants and finish-heavy properties tend toward the high end of the 15 to 35% range a study typically finds; simple shells tend toward the low end. A free estimate on your specific property is the way to see where it likely falls.

Do these numbers include bonus depreciation, or just the base reclassification?

Yes, the first-year deduction figures include the applicable bonus depreciation rate for each property's acquisition date. That is why the acquisition date matters as much as the property type when comparing one study's results to another.

Can I see the full engineered report behind one of these examples?

Four of these are benchmark runs, so no report sits behind them. The fifth is a delivered study, and a delivered report contains property-specific and client-specific detail. A free estimate on your own property, followed by an engagement, is how you would see the full 70-page report format applied to your building.

Keep reading