What is inside a church cost segregation report
The full structure of the deliverable, section by section, with the numbers from one illustrative sample study on a 14,000 SF traditional sanctuary. Every figure on this page is transcribed from that report, so you can hold your own study against it.
Before the numbers: who depreciates? A congregation is a §501(c)(3). It depreciates nothing, so a study sold to a congregation buys it nothing, and we will tell you so rather than sell you one. The owners a study helps are a taxable landlord who owns the building and leases it to a congregation, an investor who bought a former house of worship and holds it as a rental, and occasionally a congregation with a taxable unrelated-business activity, most often debt-financed rental income. This sample is written for that owner.
What this is. An illustrative sample report on a representative house of worship, watermarked ILLUSTRATIVE SAMPLE on every one of its 79 pages. There is no client in it and no real address. The interior images in it are AI-generated representative images, and the report says so on the page they appear on: they are not photographs of the subject property and nothing in the schedule is evidenced by them. On a live engagement your own photographs are incorporated per IRS Pub 5653 Chapter 4. It is not a customer's study, redacted or otherwise, and we do not publish one without that customer's named approval. What is real is the method, the section structure, the authorities cited and the schedules: those are what a paying engagement receives.
The property the sample is built on
A traditional sanctuary rather than a modern auditorium, and one that carries nearly every line this type can carry: a full sound and presentation package, pews, an organ, a baptistery and a fellowship hall kitchen. That makes it a useful ceiling to read against, not a typical building.
What the sample allocated, class by class
This is Section 3 of the report. The four class amounts add to the depreciable basis exactly, which is the check to run on any study: if the classes do not reconcile to basis, something has been double counted or dropped. Note the shape — this is the one property type we publish where the 7-year column is the large one.
| MACRS class | Allocated basis | % of basis |
|---|---|---|
| 5-year personal property Rev. Proc. 87-56 Cl. 00.12 Structured data and network cabling, AV control racks, streaming and recording computers. That is the WHOLE 5-year list, and the smallest 5-year bucket of any type we publish — information systems carry their own asset class regardless of the owner's activity, and nothing else in a leased house of worship does. | $10,628 | 0.6% |
| 7-year personal property IRC §168(e)(3)(C)(v) — §1245 property with no class life Pews, sanctuary seating and platform furnishings $56,055; the sanctuary sound, video and presentation system, priced from an illustrative invoice, $34,000; the modeled sanctuary sound reinforcement system $28,036; sanctuary and classroom carpet and removable floor coverings $22,601; fellowship hall commercial kitchen equipment and dedicated connections $20,706; sanctuary presentation and platform lighting $18,983; pipe or digital organ, mounts and dedicated blower and electrical $16,839; decorative lighting fixtures $15,839; video projection, displays and cameras $15,301; choir risers, nursery cubbies and classroom casework $10,858; baptistery tank equipment and dedicated heater and filtration connections $7,185; interior signage, bulletin displays and wayfinding $3,935. | $250,338 | 13.5% |
| 15-year land improvements Rev. Proc. 87-56 Cl. 00.3 Parking lot paving and striping $51,304; sidewalks, plazas and exterior paving $17,143; site lighting $12,082; landscaping and irrigation $10,423; exterior monument signage $7,043; stormwater detention $6,649; perimeter fencing $6,415. | $111,059 | 6.0% |
| 39-year real property IRC §1250 structural components Shell, roof and foundation, the steeple and bell tower, stained glass windows, the platform or chancel structure, the baptistery room itself, general sanctuary lighting, comfort HVAC, general electrical and general plumbing, fire sprinklers, restrooms and narthex hard flooring | $1,475,975 | 79.9% |
| Total depreciable basis | $1,848,000 | 100% |
| Accelerated property, 5-, 7- and 15-year | $372,025 | 20.1% |
Read this as one result, not as a range. This building reclassified 20.1% of basis, which sits inside the 10–22% we model for the type, and says nothing about where any other building lands. It is near the top because it carries nearly everything the type can carry. A plain rectangular room with a portable PA, no organ, no baptistery and a warming kitchen instead of a commercial one sits near the floor — the organ and the kitchen alone are $37,545 of the 7-year column here. Age, finish level, the AV package, what conveyed with the building and the land share all move the answer, which is why we model the actual property before quoting anything.
Why almost all of it is 7-year, and why that is the conservative answer
Rev. Proc. 87-56 assigns class lives by business activity. The owner's activity here is renting real estate, and the tenant congregation is not a trade or business, so there is no activity class covering the sanctuary's personal property. Property that is §1245 personal property with no class life is 7-year under IRC §168(e)(3)(C)(v). That is the position the sample takes, and it is stated on every 7-year line in Section 4 rather than asserted once in the methodology.
Moves off the 39-year schedule
- 5-year, and it is one line: structured data and network cabling, AV control racks, streaming and recording computers — asset class 00.12 information systems, which carry their own class whatever the activity
- 7-year: pews, sanctuary seating, pulpit and altar furnishings; the sound reinforcement system; presentation and platform lighting; video projection, displays and cameras; decorative lighting; sanctuary and classroom carpet; baptistery tank equipment and its dedicated heater and filtration; choir risers, nursery cubbies and classroom casework; a fellowship hall commercial kitchen and a pipe or digital organ where those convey; interior signage and bulletin displays
- 15-year: the parking lot and striping, sidewalks and plazas, site lighting, landscaping and irrigation, perimeter fencing, stormwater detention, the monument sign
Stays 39-year
- Stained glass windows. A window is a building component no matter what it depicts
- The steeple and the bell tower
- The platform or chancel structure, as distinct from the lighting and furnishings on it
- The baptistery ROOM, as distinct from the tank equipment inside it
- General sanctuary lighting, as distinct from presentation and platform lighting
- Comfort HVAC, general electrical and general plumbing, fire sprinklers, restrooms, narthex hard flooring
Almost 80% of this sample's basis stayed here. These are written out in the report rather than quietly omitted, because they are the items owners most often expect to move.
The parking lot is the part that surprises people. At $51,304 it is the single largest reclassified line in the sample, larger than the pews, because the lot is sized for the seat count rather than for the building. A sanctuary that seats several hundred needs parking for several hundred people arriving at once, which is far more paving than a 14,000 SF commercial building would otherwise carry. ⛔ One thing we do not include: a columbarium or memorial garden. Cemetery property carries its own rules and needs a scoping conversation first.
The 79 pages, section by section
Fourteen numbered sections and seven appendices. The page ranges below are this sample's; length scales with the building and with how much documentation an engagement carries.
Executive summary
The headline result, the class-by-class allocation, and the two subsections a CPA reads first: 1.1 Year 1 Tax Impact Analysis and 1.2 Allocation Bridge. This is where the $372,025 of accelerated property and the estimated $392,525 of total first-year depreciation are stated and sourced. It also carries the representative images and the note explaining what they are and are not.
Property summary
The subject property as the study saw it: area, year built, acquisition and placed-in-service dates, the program modeled, the land allocation and its source, and the inputs each figure rests on.
Cost allocation summary
The allocation by class and by category, with every principal accelerated component named and priced, and the statement that the component allocations reconcile exactly to the depreciable basis.
Detailed component breakdown
Every identified component with its class life, allocated amount, authority and evidence basis. This is the section to read if you want to see §168(e)(3)(C)(v) stated on each 7-year line rather than asserted once. Includes 4.1 Facilities Summary by CSI Division, 4.2 Indirect Cost Allocation and 4.3 Reconciliation of Costs.
Engineering rationale by category
Why each category was classified as it was, written per category rather than per line, so the reasoning can be followed without reading the full schedule.
MACRS depreciation schedules
Year-by-year deduction tables for each class, with the bonus treatment applied in the placed-in-service year, formatted to carry onto Form 4562. The 7-year schedule is the long one here, which is unusual and is the whole shape of this property type.
NPV analysis (illustrative only)
The time value of moving the deductions forward, labeled illustrative because it depends on a discount rate and a tax rate the taxpayer supplies.
Depreciation recapture considerations
What reclassification means on a later sale, including the §1245 treatment of the personal property the study identifies.
Sensitivity considerations
How the result moves when the inputs move, which is the section that answers whether a different building would land somewhere else.
Methodology and basis of analysis
The engineering-method cost approach, the data sources used, and the IRS Pub 5653 interview and documentation expectations the study is written against.
Legal authority for asset classification
The statutory and administrative authority behind each classification position taken in the schedule, including why the absence of a Rev. Proc. 87-56 activity class produces a 7-year life rather than a 5-year one.
Schedule for fixed asset ledger entry
The result restated in the form a fixed asset ledger wants it, so the classifications can be booked without retyping the schedule.
Tax practitioner review considerations
The decisions the report deliberately leaves to the CPA, including the filing method: original return, amended or superseding return, or a Form 3115 method change.
Conclusion
The result restated with its limitations, and what would change it.
Appendices
A, cost derivation summary. A-1, the multiplier ledger, which shows every adjustment applied to a modeled unit cost and why. B, IRS ATG quality elements mapped to where the report addresses each one. C, Rev. Proc. 87-56 and the IRC framework. D, case law and IRS rulings. E, audit documentation and support. F, exhibits and supporting documentation.
What this sample does not contain, and why
There is no §481(a) lookback workpaper in it. The subject property was acquired and placed in service in 2025, so there is no prior-year depreciation to catch up, and the report states plainly that it does not calculate a §481(a) adjustment. A study on a building held for years does add that computation and the Form 3115 reference workpaper, because that is the whole point of a lookback; your CPA prepares and files the Form 3115 itself. Section 13 sets out that filing-method decision. We would rather tell you what is absent than describe a section you would not receive.
What an examiner would look for
The IRS Cost Segregation Audit Techniques Guide, Pub 5653, sets out the principal elements an examiner reviews when a study is challenged. The sample maps to them section by section, and Appendix B does that mapping explicitly rather than leaving it to the reader:
- Engineering analysis, Sections 5 and 10, the rationale by category and the method it rests on
- Component-level documentation, Section 4, every component with its class life, allocated amount, authority and evidence basis
- Cost derivation, Section 4.2 and Appendices A and A-1, indirect cost allocation, the derivation of the unit costs from industry-standard construction cost data, and the ledger of every adjustment applied to them
- Asset-class mapping, Sections 3 and 11, each position tied to its authority on the line — which on this property type matters more than on any other, because the 7-year position rests on the absence of a Rev. Proc. 87-56 activity class and has to say so
- Reconciliation, Section 4.3, the check that the allocated components add back to the depreciable basis
- Audit documentation and support, Appendices B, D, E and F
Audit support ships with the report and does not expire: the workpaper exhibits, the classification rationale per component, internal technical review, and written answers to your CPA's questions about our methodology. Full scope at /audit-defense/.
Report questions
Who is this study actually for? Our congregation owns its building.
Is this a real customer's study?
Why is the 5-year bucket only 0.6% when other property types run 12% or more?
The sample reclassified 20.1%. Is that what my building will do?
What stays on the 39-year schedule?
How long is the report, and what does a study cost?
The sample has an organ and a commercial kitchen. What if ours does not?
See your building's numbers, not a sample's.
A house of worship study is self-serve: the address, the purchase price and the square footage are enough to start, and the intake asks whether a commercial kitchen and an organ conveyed with the building. If you are a congregation with no taxable income, tell us and we will say so rather than sell you a study.
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