Tampa, FL · $1.6M
Strip center, 6 tenants
Year-1 federal benefit
$120,800
Retail
Retail cost segregation: $100K–$785K Year-1 deductions.
Storefront finishes, signage, parking lots, and specialty fixtures push retail reclassification higher than office.
The 30-second answer
Retail cost segregation is an engineering-based study that reclassifies a store or strip center's components out of the default 39-year commercial schedule into faster 5-, 7-, and 15-year MACRS classes. Retail stacks two levers: a merchandising interior dense with 5-year personal property (display fixtures and gondolas, track and accent lighting, point-of-sale counters, branded finishes, anti-theft and camera systems, fitting rooms), and a customer parking lot that is usually the single largest 15-year land improvement because retail is built to draw traffic. With 100% bonus depreciation the reclassified amount (about 21–27% of building basis, more when display fixtures are documented) is deductible in Year 1.
Retail cost segregation reclassifies 20–37% 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.
| Property type | Reclass to 5/7/15-yr | Year-1 federal benefit | Study cost |
|---|---|---|---|
| STR | 22–33% | $52K–$235K | From $495 |
| SFR | 13–26% | $26K–$135K | From $495 |
| Condo | 10–17% | $16K–$61K | From $495 |
| Duplex | 13–20% | $31K–$100K | From $995 |
| Fourplex | 16–29% | $64K–$230K | From $995 |
| Office | 16–29% | $95K–$735K | From $1,995 |
| Retail this page | 20–37% | $100K–$785K | From $1,995 |
| Industrial | 15–28% | $89K–$950K | From $2,495 |
| Self-storage | 19–36% | $160K–$1.8M | From $2,495 |
| Medical office | 16–29% | $95K–$615K | From $2,995 |
| Mixed-use | 12–23% | $71K–$585K | From $1,995 |
| Multifamily | 15–28% | $48K–$200K | From $995 |
| Multifamily 5+ | 14–26% | $110K–$1.0M | From $1,995 |
| Triplex | 14–26% | $44K–$165K | From $995 |
| Restaurant | 16–29% | $81K–$490K | From $2,995 |
| Vet | 19–36% | $96K–$610K | From $2,995 |
| Gym | 21–40% | $120K–$1.0M | From $2,995 |
| Dealership | 25–47% | $530K–$4.7M | From $2,995 |
| ADU | 7–14% | $8K–$39K | From $495 |
| Commercial | 18–34% | $105K–$865K | From $1,995 |
| Data center | 43–65% | $2.9M–$33M | $4,995–$54,995 (sub-$100M); $100M+ by proposal |
| Senior living | 21–39% | $355K–$2.6M | By proposal |
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 retail 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…
- ✓Strip centers with significant parking and signage
- ✓Restaurant/retail tenants with specialty MEP
- ✓Owners considering 1031 exchange — pre-sale study locks in the depreciation profile
Skip it when…
- ×Unfinished shells with no completed tenant build-outs
Estimate
Run the numbers on your retail.
Pre-set to Retail defaults — adjust price + bracket to match your property.
Estimated Year-1 tax savings · Click to order →
$37,740
on $102,000 of accelerated deductions
Want this in writing for your CPA? Get a 1-page analysis →5-yr15-yr27.5/39-yr
Study cost
$1,995
ROI on study
19×
Delivery
< 1 hour
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
Retail cost segregation, by question.
Do retail stores and strip centers qualify for cost segregation?
Yes. Retail stacks two reclass levers: a merchandising interior dense with 5-year personal property (display fixtures and gondolas, track and accent lighting, point-of-sale counters, branded finishes, anti-theft systems, fitting rooms), and a customer parking lot that is usually the single largest 15-year land improvement. A typical store reclassifies roughly 21–27% of building basis, more when display fixtures are documented.
Is the customer parking lot 15-year property?
Yes. Surface parking, drive aisles, striping, curbs, wheel stops, site and parking-lot lighting, pylon and monument signage, and landscape islands are 15-year land improvements, not the 39-year period of the building. On retail the parking lot is typically the biggest single reclassification line because a store needs far more parking than its footprint.
Are display fixtures, gondolas, and track lighting 5-year property?
Generally yes. Built-in display shelving, gondolas, slatwall, display cases, point-of-sale counters, and merchandising track and accent lighting are tenant trade fixtures replaced at a concept changeover, so they are classic Section 1245 personal property depreciated over 5 years. The general overhead lighting that any tenant would need stays with the building.
I lease my store and paid for the build-out — does it apply?
Yes, and often more strongly. A tenant who funded the store build-out depreciates that investment, and with no land or 39-year shell to strip out, a retail 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 retail cost segregation study cost?
Retail properties are priced as standard commercial property: from $1,995 for a sub-$1M basis and $3,295 for a typical $1M–$3M store or strip center, delivered as a CPA-ready PDF in under an hour. No site visit required.
Regulation references
The rules that govern retail 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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