Commercial cost segregation services — by asset class.

Reviewed by Cost Seg Smart Editorial Team · First published: May 6, 2026 · Last reviewed: May 15, 2026 · Sources

Commercial cost segregation is the engineering-based reclassification of a commercial property's depreciable basis from the default 39-year MACRS schedule into 5-, 7-, and 15-year property classes per Rev. Proc. 87-56.

Six commercial asset classes, six engine paths.

A $2M restaurant doesn't reclassify like a $2M office condo. Different components, different IRS class lives, different math. We differentiate by asset class and by subtype within each class. Reclassification ranges below are the bands we publish per property type; your study's number depends on basis allocation, finish density, and use type.

How basis is reclassified across recovery periods.

Every commercial study reclassifies basis from the default 39-year structural shell into shorter MACRS classes per Rev. Proc. 87-56. 5-year is FF&E + decorative finishes; 15-year is land improvements + Qualified Improvement Property; 39-year is the building shell that doesn't reclassify.

Typical reclassification by asset class.

These are the bands we publish per property type: measured on our delivered studies where we have enough of a property type, and modeled by our engine on representative properties elsewhere. The Year-1 column is illustrative arithmetic at the representative rate, not a result for any specific property.

Nine commercial properties, nine outcomes.

Year-1 federal tax savings shown at top federal bracket, assuming 100% bonus depreciation on the reclassified portion. Your study's number will vary with basis allocation, finish density, and your CPA's review.

What makes commercial different from residential.

Commercial property doesn't follow the same classification path as a single-family rental. Five subtype-aware mechanisms differentiate the analysis — each grounded in the published IRS class-life and finish-density guidance, applied per property.

Commercial study pricing.

Pricing scales by basis band and property type. Standard Commercial, Multifamily 5+, and Industrial / Warehouse each have their own band ladder; Specialty Commercial (medical, restaurant, hospitality, manufacturing) is scoped per engagement. Built on the same MACRS classification framework and IRS Pub. 5653 documentation standards engineering firms use — the price difference reflects an efficient delivery model, not lower rigor.

What we provide if your study is examined.

Audit-support scope is committed in writing — same posture as engineering firms charging $5,000–$15,000. We provide engineering documentation; your CPA, EA, or attorney provides taxpayer representation under Circular 230. The summary below is excerpted; full scope and 13-element ATG framework at /audit-defense/.

See the deliverable for your asset class.

Six commercial sample PDFs available — same structure for every study. Methodology section, full component schedule with cost-source line citations, year-by-year depreciation tables, land valuation methodology, MACRS classification with Rev. Proc. 87-56 anchor, quality checks, and Form 3115 readiness pack for lookback applicability.

When to skip this and use a traditional firm.

Not every commercial property fits a systematized engineering workflow. Below are four patterns where the right answer is to engage a traditional engineering firm with an on-site visit, even at $5,000–$15,000.

• $15M+ properties — basis large enough that even small reclassification differences justify on-site engineering and a custom scoping engagement. We'll quote on request.
• Ground-up development — cost segregation applies after a property is placed in service. During construction, basis is capitalized under §263A. Talk to your CPA about §263A capitalization first; cost-seg comes later.
• Multi-parcel campus deals — three or more parcels under a single acquisition with shared improvements requires custom basis allocation. Our automation isn't built for split-parcel basis. Refer to a traditional firm.
• Selling within 12 months without a §1031 exchange — recapture under §1245 + §1250 eats most of the benefit when held under 24 months. Pair with a §1031 to defer the recapture, or skip cost-seg and use straight-line.

Commercial cost-seg questions.

Sources & primary references.

• IRS Cost Segregation Audit Techniques Guide (Pub. 5653) — methodology framework for every defensible study.
• Rev. Proc. 87-56 — Asset Class Lives — IRS recovery period assignments per asset class.
• 26 U.S.C. §168 — MACRS — statutory basis for cost-seg reclassification + §168(k) bonus depreciation.
• 26 U.S.C. §481(a) — method-change adjustment statute permitting Form 3115 lookback.
• Hospital Corp. of America v. Commissioner, 109 T.C. 21 (1997) — Tax Court decision establishing engineering-based reclassification framework.
• AmeriSouth XXXII v. Commissioner, T.C. Memo. 2012-67 — documentation standards examiners apply today.
• Rev. Proc. 2015-13 — automatic-consent for depreciation method changes (DCN 7).
• Cost Seg Smart reclassification bands by property type — source for the reclassification ranges quoted on this page; measured on our delivered studies where we have enough of a property type, modeled elsewhere.

The next step depends on where you are in the evaluation. Most commercial owners start with the intake form for a property-specific written quote.

Or skip ahead: run an instant estimate  ·  order directly