Most studies reclassify 20% to 35% of a building's depreciable basis into 5-, 7-, and 15-year property. Under current law, essentially all of that reclassified amount is deductible in the first year, which is what turns a routine depreciation schedule into a five- or six-figure deduction.
Where properties land in the range
Standard residential rentals and apartment buildings usually come in around 20% to 30%, driven by flooring, appliances, cabinetry, window treatments, and site improvements like parking and landscaping. Simple warehouses and shell buildings sit lower, often 10% to 20%, because they are mostly structure. Component-heavy properties, think restaurants, medical and dental offices, car washes, and self-storage with heavy site work, can run above 35% because so much of their cost is specialty systems and land improvements.
Why the reclassified slice is deductible immediately
Bonus depreciation under IRC section 168(k) applies to property with a MACRS recovery period of 20 years or less, which covers every class a cost segregation study creates. The OBBBA legislation of July 2025 made the 100% rate permanent for qualified property acquired after January 19, 2025. Property acquired on or before that date keeps the phase-down schedule: 80% for 2023, 60% for 2024, and 40% for 2025 placements. Used property qualifies as long as it is new to you, under the acquisition rules in section 168(k)(2)(E).
A worked example
Buy a $2,000,000 apartment building in February 2026. The land allocation is $400,000, leaving $1,600,000 of depreciable basis. A study reclassifies 27%, or $432,000, into 5- and 15-year property. First-year deductions: $432,000 of bonus depreciation plus about $37,000 of regular 27.5-year depreciation on the remaining $1,168,000 under the mid-month convention. Call it $469,000 in year 1.
Without the study, the same building produces about $51,000 of first-year depreciation. The study multiplied the year-1 deduction roughly 9 times. Note that total depreciation over the life of the property is unchanged; cost segregation accelerates timing, it does not create new basis.
What trims the number
A high land allocation shrinks depreciable basis before the percentages even apply. IRC section 469 can suspend the loss if you are not a real estate professional and the property is not a qualifying short-term rental with material participation, in which case the deduction waits for passive income or a sale. Recapture under sections 1245 and 1250 claws back ordinary-rate treatment on the accelerated portion when you sell, so holding period matters too. A screening estimate, like the cost segregation screen inside Amadae's savings playbook, models your specific reclassification range and first-year benefit before you commission a study.