Nashville, TN · $2.3M
Retail ground floor + 6 apartments above
Year-1 federal benefit
$108,500
Mixed-Use
Mixed-use cost segregation: $63K–$515K 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 is an engineering-based study that reclassifies a mixed-use building's components out of its default depreciation schedule into faster 5-, 7-, and 15-year MACRS classes. A mixed-use building blends two rule sets: the ground-floor commercial space depreciates over 39 years and the upper-floor residential over 27.5 years, and the study weights the analysis by the floor area of each. It captures the best of both buckets — the commercial fit-out and storefront finishes, the residential unit appliances and finishes, and the shared parking, landscaping, and site work (15-year) — typically reclassifying 12–23% of basis, deductible in Year 1 under 100% bonus depreciation.
Mixed-use cost segregation reclassifies 12–23% 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 — industry-standard 2026 construction 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. For the general explanation, see what a cost segregation study is and what the report contains.
| Property type | Reclass to 5/7/15-yr | Year-1 federal benefit | Study cost |
|---|---|---|---|
| STR | 19–39% | $45K–$280K | From $495 |
| SFR | 9–32% | $18K–$165K | From $495 |
| Condo | 10–17% | $18K–$68K | From $495 |
| Brownstone | 5–20% | $60K–$640K | From $495 |
| Rowhouse | 5–18% | $10K–$170K | From $495 |
| Duplex | 8–21% | $19K–$105K | From $995 |
| Fourplex | 14–29% | $56K–$230K | From $995 |
| Office | 16–29% | $84K–$650K | From $995 |
| Retail | 20–37% | $90K–$690K | From $995 |
| Industrial | 15–28% | $78K–$840K | From $2,495 |
| Self-storage | 19–36% | $140K–$1.6M | From $2,495 |
| Medical office | 16–29% | $84K–$540K | From $2,995 |
| Mixed-use this page | 12–23% | $63K–$515K | From $995 |
| Multifamily | 14–28% | $44K–$200K | From $995 |
| Multifamily 5+ | 14–26% | $110K–$1.0M | From $1,995 |
| Triplex | 8–26% | $25K–$165K | From $995 |
| Restaurant | 16–29% | $72K–$430K | From $2,995 |
| Vet | 19–36% | $85K–$540K | From $2,995 |
| Gym | 21–40% | $110K–$900K | From $2,995 |
| Dealership | 25–47% | $465K–$4.2M | From $2,995 |
| ADU | 7–14% | $8K–$39K | From $495 |
| Commercial | 18–34% | $94K–$765K | From $995 |
| Data center | 43–65% | $2.5M–$29M | $4,995–$54,995 (sub-$100M); $100M+ by proposal |
| Senior living | 21–39% | $315K–$2.3M | By proposal |
| Funeral homes | 18–30% | $135K–$900K | By proposal |
| Child day care | 15–28% | $56K–$630K | From $2,995 |
| Adult day care | 14–26% | $78K–$780K | From $2,995 |
| Church | 10–22% | $37K–$825K | From $2,995 |
| Farm | 8–65%† | $19K–$780K | From $995 |
Reclassification ranges from the bands we publish per property type (measured on our delivered studies where we have enough of a type, modeled elsewhere); 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+. The ADU figure is an ADU acquired with a house; one the owner built or converted is priced on its documented construction cost, from $995. See full provider comparison.
† Farm: the figure is property with a recovery period of 20 years or less, on a farm with one or more rental houses on it. It counts 10- and 20-year property, which no other row has, and its dollar figure is a first-year deduction, not tax saved. A farm is quoted from a list of what is on it; see how.
Worked examples · modeled
What mixed-use cost seg looks like in practice.
Illustrative, modeled properties, not client engagements. 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 · Click to order →
$27,394
on $74,038 of accelerated deductions (Year 1, beyond straight-line)
typical $16,437–$31,503
Want this in writing for your CPA? Get a 1-page analysis →5-yr15-yr27.5/39-yr
Study cost
$1,495
ROI on study
18×
Delivery
Next business day
Estimate based on industry-standard 2026 construction cost data and IRC §168(k). Your actual result varies with property age, condition, and basis allocation.
Frequently asked
Mixed-use cost segregation, by question.
Do mixed-use properties qualify for cost segregation?
Yes, and they reclassify well — typically 12–23% of basis — because they stack a commercial fit-out and a residential one over shared site work. The study analyzes the ground-floor commercial space (39-year) and the upper-floor residential (27.5-year) separately, weighted by floor area, then reclassifies the shorter-lived property in each plus the parking and landscaping.
How are the commercial and residential portions treated differently?
The two parts sit on different building schedules: ground-floor commercial depreciates over 39 years, upper-floor residential over 27.5. The study allocates basis between them by gross floor area, applies the right schedule to each shell, and reclassifies the 5-, 7-, and 15-year components from both — so you capture the storefront finishes, the unit appliances, and the shared site work.
How much does a mixed-use cost segregation study cost?
Mixed-use properties are priced as standard commercial: from $995 for a sub-$500K basis, $1,495 for $500K–$1M, and $3,295 for a $1M–$3M building, delivered as a CPA-ready PDF, usually the next business day. Remote for most residential and small-commercial studies; on-site observation for larger commercial projects.
Regulation references
The rules that govern mixed-use cost segregation.
- Cost Segregation for Mixed-Use Properties: How the 27.5yr + 39yr Split Works (2026) — our in-depth guide to 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).
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