Nashville, TN · $2.3M
Retail ground floor + 6 apartments above
Year-1 federal benefit
$148,600
Mixed-Use
Mixed-use cost segregation: $45K–$200K Year-1 deductions.
Ground-floor retail + upstairs residential each have different cost-seg rules. Done right, you get the best reclassification of both buckets.
The 30-second answer
Mixed-use cost segregation reclassifies 24–30% of depreciable basis from the 27.5- or 39-year shell into 5-, 7-, and 15-year MACRS classes per 26 U.S.C. § 168 and Rev. Proc. 87-56. Under OBBBA's permanent 100% bonus depreciation (placed-in-service 2025+), reclassified components are deductible in year one. All credible cost-seg providers use the same federal framework — RSMeans 2024 cost data, MACRS classification, IRS Audit Techniques Guide (Pub 5653) compliance. What differs across property types is land-allocation share, FF&E weight, and material-participation eligibility under §469.
| Property type | Reclass to 5/7/15-yr | Year-1 federal benefit | Study cost |
|---|---|---|---|
| STR | 20–28% | $20K–$80K | From $495 |
| SFR | 16–22% | $15K–$50K | From $495 |
| Condo | 14–18% | $10K–$35K | $495–$1,295 |
| Duplex | 20–25% | $18K–$55K | $995–$1,995 |
| Fourplex | 22–26% | $30K–$90K | $995–$1,995 |
| Office | 25–32% | $40K–$150K | $995–$2,995 |
| Retail | 26–32% | $50K–$180K | $995–$2,995 |
| Industrial | 16–24% | $30K–$120K | $995–$2,995 |
| Medical office | 30–38% | $60K–$220K | $995–$2,995 |
| Mixed-use this page | 24–30% | $45K–$200K | $995–$2,995 |
| Multifamily | 22–26% | $25K–$80K | $995–$1,995 |
| Multifamily 5+ | 24–30% | $60K–$300K | $995–$2,995 |
| Triplex | 22–25% | $22K–$70K | $995–$1,995 |
| Restaurant | 32–40% | $80K–$280K | $995–$2,995 |
| ADU | 20–28% | $8K–$30K | $495–$795 |
| Commercial | 22–32% | $40K–$200K | $995–$2,995 |
Reclassification ranges from internal benchmarks across 4,000+ studies; Year-1 federal benefit assumes 37% bracket and full first-year usability. Study costs are Cost Seg Smart pricing — comparable engineering studies elsewhere range $5,000–$15,000+. See full provider comparison.
Real examples
What mixed-use cost seg looks like in practice.
Estimates assume 37% federal bracket and full first-year usability of the loss (active income offset or REPS). Your actual benefit varies with bracket, basis allocation, and CPA's treatment.
Good fit when…
- ✓Ground-floor commercial + upper-floor residential properties
- ✓Owner-operators of the commercial unit who also rent the residential portion
Skip it when…
- ×Properties where you can't separately identify the commercial vs. residential basis
Estimate
Run the numbers on your mixed-use.
Pre-set to Mixed-use defaults — adjust price + bracket to match your property.
Estimated Year-1 tax savings
$42,458
on $114,750 of accelerated deductions
5-yr15-yr27.5/39-yr
Study cost
$1,995
ROI on study
21×
Delivery
< 1 hour
Estimate based on RSMeans 2024 cost data and IRC §168(k). Your actual result varies with property age, condition, and basis allocation.
Regulation references
The rules that govern mixed-use cost segregation.
- Real estate professional status (REPS) — the 750-hour and 51% tests under 26 U.S.C. § 469(c)(7), and the seven material participation tests under Treas. Reg. § 1.469-5T. Required to offset W-2 income with long-term rental losses unless the property qualifies under the STR loophole.
- Form 3115 (catch-up depreciation) — how to apply cost segregation to a property placed in service in a prior year. Full § 481(a) catch-up adjustment, automatic change-number 7, no IRS user fee.
- Treas. Reg. § 1.469-1T — full reference — all six (A)–(F) exceptions that reclassify a rental as non-rental for passive activity loss purposes.
- Regulations hub — full canonical reference for all cost segregation regulations.
- irsdepreciationrules.com — companion plain-language reference for the underlying IRS depreciation statutes (operated by Cost Seg Smart).