Cost segregation is one of the most effective — yet often overlooked — tax strategies in real estate. By breaking down your property into components that can be depreciated over shorter lifespans, you can accelerate deductions, reduce taxable income, and increase cash flow — often in the very first year.

While almost any property can benefit, certain types of real estate offer far greater potential because they contain more qualifying components. If you own or plan to acquire any of these five property types, a cost segregation study could deliver significant tax advantages, especially when paired with 2025’s enhanced 100% bonus depreciation rules.

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1. Multifamily Properties

Apartment complexes, duplexes, and student housing are prime candidates. Each unit typically includes:

• Appliances
• Removable flooring (carpet, vinyl-composite tile)
• Cabinetry
• Blinds and wall coverings
  

Multiply those components across dozens or hundreds of units, and the deductions add up fast. For example, a $5 million apartment building might yield $1.5 million in accelerated depreciation in year one.

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2. Retail Spaces

Strip malls, single-tenant stores, and shopping centers usually feature:

• Specialty and decorative lighting
• Branded signage
• Display cases
• Custom finishes
  

Retail properties often have additional exterior assets (landscaping, parking lot lighting) that qualify for shorter depreciation schedules.

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3. Hospitality Properties

Hotels, motels, resorts, and short-term rentals are loaded with depreciable items eligible for shorter depreciation timelines:

• Guest room furnishings
• Lobby finishes
• Kitchen and dining equipment
• Gym and spa installations
• Interior and exterior pools
  

Because each space is outfitted individually, the quantity of qualifying assets is substantial — and so are the savings.

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4. Industrial Buildings

Factories, warehouses, and distribution centers often include:

• Racking
• Large parking lots
• Heavy electrical, HVAC, and plumbing systems
• Equipment concrete pads
  

These operational improvements often qualify for 5-, 7-, or 15-year depreciation timelines, delivering accelerated deductions.

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5. Office Buildings

From high-rise corporate offices to suburban workspaces, these properties can contain:

• Removable partition walls
• Built-in workstations
• Data cabling
• Decorative interior finishes
  

Tenant improvement allowances and tech amenities can also increase the proportion of short-life property.

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Make Better Real Estate Choices with the Right Tax Strategy

Owning the right property is only half the equation — maximizing its financial performance is the other half. If you own any of the property types above, we can help you:

• Schedule a professional cost segregation study
• Apply updated IRS bonus depreciation rules
• Maximize deductions to boost your cash flow
  

Your property could be generating far more tax savings than you realize. Let’s find out how much you could keep in your pocket this year.

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