Phoenix, AZ · $2.1M
Class B office, recent tenant build-out
Year-1 federal benefit
$125,500
Office Building
Office cost segregation: $84K–$650K Year-1 deductions.
Office basis is mostly 39-yr structure, but tenant build-outs, specialty MEP, and parking lots produce significant 5/15-yr reclassification.
The 30-second answer
Office cost segregation is an engineering-based study that reclassifies an office building's components out of the default 39-year commercial schedule into faster 5-, 7-, and 15-year MACRS classes. An office is the most building-heavy commercial type, so it reclassifies less than retail, medical, or restaurant property — typically 16–29% of basis. The levers are the tenant systems (demountable partitions, dedicated server and conference HVAC, low-voltage data cabling, decorative lighting, built-in millwork, access control), the freestanding furniture (7-year), and the parking lot (15-year, usually the biggest line). With 100% bonus depreciation that reclassified amount is deductible in Year 1, and on a larger building a modest percentage is still six figures. The base structure and general HVAC stay on 39 years.
Office cost segregation reclassifies 16–29% 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 | 8–32% | $16K–$165K | From $495 |
| Condo | 10–19% | $18K–$76K | 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 this page | 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 | 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 office 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…
- ✓Owner-operators or commercial investors with $1M+ basis
- ✓Buildings with specialty MEP (server rooms, medical, dental fit-outs)
- ✓Properties with significant parking lot, landscaping, fencing (15-yr land improvements)
Skip it when…
- ×Triple-net leased properties where the tenant owns the build-out
- ×Class C buildings in distressed markets — the engineered study won't recover much
Estimate
Run the numbers on your office.
Pre-set to Office defaults — adjust price + bracket to match your property.
Estimated Year-1 tax savings · Click to order →
$26,025
on $70,337 of accelerated deductions (Year 1, beyond straight-line)
typical $21,915–$39,722
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
17×
Delivery
1–2 business days
Your study includes more than the report.
- Engineering-based, property-specific analysis
- Direct coordination with your CPA
- Free revisions for 12 months; corrections of our errors always free
- Renovation analysis under $100,000 included
- Lifetime written audit support
- CPA-ready depreciation schedules and Excel fixed-asset file
Everything included in your study fee. Form 3115 preparation available separately.
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
Office cost segregation, by question.
Do office buildings qualify for cost segregation?
Yes, though the reclassification is more modest than retail, medical, or restaurant property — an office is the most building-heavy commercial type, so a typical office reclassifies roughly 16–29% of basis. The levers are the tenant systems (demountable partitions, dedicated server/conference HVAC, low-voltage cabling, decorative lighting, millwork, access control), the freestanding furniture, and the parking lot. On a larger building, even a modest percentage is six figures of Year-1 depreciation.
Why does an office reclassify less than retail or medical?
Because an office is mostly building. A retail store has a dense merchandising fit-out and a big parking lot; a medical office has specialty clinical infrastructure. A general office is mainly structure, base systems, and finishes that would serve any tenant, so the share that qualifies as shorter-lived property is smaller. We set that expectation honestly rather than inflate it.
Is low-voltage data cabling and dedicated HVAC 5-year property?
Generally yes. Low-voltage data and telecom cabling is replaced on tenant turns and is typically 5-year property, as is dedicated or supplemental HVAC serving an identifiable load such as a server room or conference zone. The base building HVAC that conditions the whole building stays on the 39-year schedule.
I funded my own office build-out in a leased suite — does it apply?
Yes, and often dramatically more than an owner study. A tenant-funded build-out has no land or 39-year shell to strip out, so it reclassifies far more of its cost. That is handled as a tenant-improvement study on your build-out basis.
How much does an office cost segregation study cost?
Office buildings are priced as standard commercial property: from $995 for a sub-$500K basis, $1,495 for $500K–$1M, and $3,295 for a typical $1M–$3M building, delivered as a CPA-ready PDF, within 1–2 business days. Remote for most residential and small-commercial studies; on-site observation for larger commercial projects.
Regulation references
The rules that govern office cost segregation.
- Cost Segregation for Office Buildings: 2026 Guide with Real Numbers — our in-depth guide to office 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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