Office · professional · co-working · tenant / leasehold study

Office build-out cost segregation

You fit out a leased floor — workstations, glass-walled conference rooms, supplemental cooling, cabling, finishes. As a tenant you funded the improvements, not the building, so most of that fit-out accelerates.

Start your study → Typically reclassifies 65–85% of build-out cost

Office build-out cost segregation — also searched as office build-out depreciation, office renovation depreciation, or tenant improvement depreciation for an office — analyzes the fit-out you funded. An office fit-out is QIP-heavy: glass office partitions and demountable walls, conference-room AV, data and specialized cabling, security and access control, reception millwork, tenant-specific lighting, supplemental and server-room HVAC, and break-room improvements spread across 5- and 15-year property, with interior HVAC distribution, ceilings, and finishes as 15-year QIP. Office build-outs also often include systems furniture, modular workstations, and cubicles that may qualify for a shorter 7-year recovery period. With no land or shell in your basis, 65–85% of an office fit-out typically reclassifies. (Own the building rather than lease it? That's an office building cost segregation study — see the owner link below.)

Demountable glass fronts, conference-room AV, security and access control, the supplemental cooling for a server closet, and cabling threaded through every workstation — an office fit-out is QIP-dominant, with systems furniture and modular workstations that may also qualify for a shorter 7-year recovery period.

The basis analyzed is your build-out cost — not a property purchase price (you don't own the building). Ranges below are illustrative engineering estimates as a share of that build-out cost.

Open-plan office fit-out with glass partitions and systems furniture — QIP and 7-year property in a cost segregation study

What reclassifies in a office & professional build-out

Component MACRS life Basis share
Systems furniture, modular workstations & cubicles
Modular/reconfigurable — may qualify for a 7-year recovery period (asset class 00.11), evaluated per item
 7-year (often) 8–18%
Glass office partitions & demountable walls
Reconfigurable office fronts vs. fixed drywall
 5 / 15-year 6–14%
Conference-room AV & presentation systems
 5-year 2–5%
Data & specialized cabling
 5-year 2–6%
Security & access-control systems
Badge readers, cameras, controlled-entry hardware
 5-year 1–4%
Reception millwork & built-ins
 5 / 7-year 2–6%
Supplemental / server-room HVAC
Dedicated cooling for IT closets and high-density areas
 5 / 15-year 3–8%
Tenant-specific & accent lighting, controls
 5-year 2–6%
Break-room / pantry improvements
 5 / 15-year 2–6%
Interior HVAC distribution, ceilings & finishes
 15-year QIP 16–28%

This is the segment-specific view. For the full 5- / 7- / 15-year QIP framework and primary sources, see the tenant-improvement cost segregation overview →

Worked example

Scenario
Office fit-out: glass offices, conference rooms, reception & modular workstations
Build-out basis
$750,000
Illustrative reclassification
72% = $540,000 into accelerated MACRS
Estimated year-1 deduction
$540,000 (100% §168(k) bonus on eligible property)
Estimated federal tax savings
$200,000 at 37% marginal
Study fee
$2,995

How the $750,000 build-out splits by MACRS class

Recovery class Reclassified amount % of build-out
5-year personal property$187,50025%
7-year property$127,50017%
15-year QIP & land improvements$225,00030%
39-year (remaining structural)$210,00028%

Illustrative and modeled — year-1 figures depend on build-out scope, §168(k) eligibility, §469 status, entity structure, and your CPA's tax position when the deduction lands. Not a filing figure. Every leasehold order is reviewed by our team before delivery.

Frequently asked

Isn't an office fit-out mostly slow 39-year property?
No — as a tenant you don't own the 39-year shell. Your fit-out is dominated by 15-year QIP (partitions, HVAC distribution, finishes) and 5-year property (AV, cabling, security, lighting), plus systems furniture and modular workstations that may carry a shorter 7-year life. 65–85% typically reclassifies.
Does my systems furniture and modular workstations qualify separately?
Often. Office furniture, systems furniture, and modular workstations commonly classify to a 7-year recovery period under Rev. Proc. 87-56 asset class 00.11 — separate from the building — but each item is evaluated from your fixed-asset register, not assumed. Share it and we classify line by line.
We fit out the floor a couple of years ago. Can we still benefit?
Often yes. A Form 3115 change in accounting method can catch up the previously-missed accelerated depreciation as a §481(a) adjustment in the current year, without amending prior returns. We provide the workpaper pack; your CPA files the form.

Keep going

Everything you need to scope a office build-out cost segregation engagement:

Other tenant build-out studies

You paid for the build-out. Get the depreciation you're owed.

Start your study and upload your build-out documents, or send your depreciation schedule and construction budget and we'll talk it through. Every leasehold order is reviewed by our team before delivery.