Las Vegas, NV · $1.6M
Full-service restaurant with kitchen rebuild
Year-1 federal benefit
$95,600
Restaurant
Restaurant cost segregation: $72K–$430K Year-1 deductions.
Walk-in coolers, hood systems, grease traps, point-of-sale wiring, decorative finishes. Restaurants have the densest commercial reclassification of any property type.
The 30-second answer
Restaurant cost segregation is an engineering-based study that reclassifies a restaurant's components out of the default 39-year commercial schedule into faster 5-, 7-, and 15-year MACRS classes. It fits owners who bought a restaurant with its kitchen in place or built one out, because a restaurant is mostly specialty equipment and trade fixtures rather than building — kitchen exhaust hoods, walk-in coolers, bar refrigeration, draft and glycol lines, decorative dining lighting, booth seating, and branded finishes are 5-year personal property, and the parking and patio are 15-year land improvements. That matters because, with 100% bonus depreciation, the reclassified amount (about 16–29% of building basis, the densest of any commercial type when the kitchen and bar are documented) is deductible in Year 1. A study identifies and documents these assets; it does not assume them.
Restaurant 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 | 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 this page | 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 restaurant 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 who paid for the kitchen and front-of-house build-out
- ✓Properties with significant outdoor patio, signage, parking
Skip it when…
- ×Vanilla shell rentals where the operator funded the build-out
Estimate
Run the numbers on your restaurant.
Pre-set to Restaurant defaults — adjust price + bracket to match your property.
Estimated Year-1 tax savings · Click to order →
$32,873
on $88,846 of accelerated deductions (Year 1, beyond straight-line)
typical $27,394–$50,679
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
22×
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
Restaurant cost segregation, by question.
Do restaurants qualify for cost segregation?
Yes — restaurants are one of the property types that benefit most, because so much of a restaurant is specialty equipment and trade fixtures rather than building. Kitchen exhaust hoods, walk-in coolers, bar refrigeration, decorative lighting, booth seating, and branded finishes are 5-year personal property when you own them and they are documented; the parking and patio are 15-year land improvements. A full-service restaurant commonly reclassifies 16–29% of basis.
Are commercial kitchen hoods and walk-in coolers 5-year property?
Generally yes. A kitchen exhaust hood, its fire suppression and dedicated make-up air, and freestanding walk-in coolers and freezers serve identifiable cooking equipment and are typically depreciated over 5 years rather than 39. IRS Publication 5653 addresses restaurant property directly; the classification of any specific asset depends on its facts and is confirmed in the study.
I lease my space and paid for the build-out — does it still apply?
Yes, and it is often even stronger. A tenant who funded the kitchen and dining build-out depreciates that investment, and with no land or 39-year shell to strip out, a restaurant build-out reclassifies far more of its cost. That is handled as a tenant-improvement study on your build-out basis.
How much does a restaurant cost segregation study cost?
Restaurants are priced on the specialty-commercial ladder: from $2,995 for a sub-$1M basis and $4,995 for a $1M–$3M restaurant, 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.
I bought my restaurant years ago — is it too late?
No. A lookback study lets you claim missed depreciation via Form 3115 on your current-year return under the IRS automatic-consent procedures, with no amended returns. The cumulative catch-up flows through in a single year.
Regulation references
The rules that govern restaurant cost segregation.
- Cost Segregation for Restaurants: 2026 Guide with Real Numbers — our in-depth guide to restaurant 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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