{
  "slug": "cost-segregation-first-year",
  "title": "Cost Segregation First-Year Benefit Calculator",
  "heading": "Cost Segregation First-Year Tax Benefit Calculator",
  "category": "financial",
  "url": "https://www.revenuelab.fyi/toolbox/cost-segregation-first-year",
  "summary": "Estimate accelerated depreciation and first-year tax savings from a cost seg study.",
  "description": "Cost segregation reclassifies parts of a building — carpet, cabinetry, parking lot paving, certain electrical and plumbing tied to specific equipment — from 27.5 or 39-year straight-line real property into 5, 7, and 15-year personal property and land improvement classes. Those shorter-life assets qualify for bonus depreciation, letting you write off a large percentage of the reclassified basis in year one instead of over decades. This calculator applies a typical reclassification percentage (studies commonly move 20-35% of building basis into short-life buckets for residential and light commercial) and a bonus depreciation rate you specify, since bonus depreciation has been phasing down under the 2017 tax law schedule — 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026, absent new legislation extending it. The output is your estimated first-year depreciation deduction and the tax cash saved at your marginal rate, which is the number that actually matters for deciding whether the $5,000-$15,000 study fee pencils out.",
  "formula": "Reclassified basis = Building basis × reclass%; First-year bonus deduction = Reclassified basis × bonus%; Remaining reclassified basis depreciates over its class life; Tax savings = First-year deduction × marginal tax rate.",
  "dateModified": "2026-09-30",
  "run_url": "https://www.revenuelab.fyi/api/public/calc?tool=cost-segregation-first-year",
  "inputs": [
    {
      "id": "buildingBasis",
      "label": "Building basis (excludes land)",
      "kind": "number",
      "hint": null,
      "default": 400000,
      "unit": "$",
      "min": 1,
      "max": null
    },
    {
      "id": "reclassPct",
      "label": "% of basis reclassified to short-life assets",
      "kind": "number",
      "hint": null,
      "default": 25,
      "unit": "%",
      "min": 5,
      "max": 45
    },
    {
      "id": "bonusPct",
      "label": "Bonus depreciation rate this tax year",
      "kind": "number",
      "hint": null,
      "default": 60,
      "unit": "%",
      "min": 0,
      "max": 100
    },
    {
      "id": "marginalRate",
      "label": "Marginal tax rate",
      "kind": "number",
      "hint": null,
      "default": 35,
      "unit": "%",
      "min": 0,
      "max": 50
    },
    {
      "id": "studyFee",
      "label": "Cost segregation study fee",
      "kind": "number",
      "hint": null,
      "default": 8000,
      "unit": "$",
      "min": 0,
      "max": null
    }
  ],
  "outputs": [
    {
      "id": "taxSavings",
      "label": "Estimated first-year tax savings",
      "format": "currency",
      "hint": null,
      "primary": true
    },
    {
      "id": "firstYearDeduction",
      "label": "First-year depreciation deduction",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "netBenefit",
      "label": "Net benefit after study fee",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "roiOnStudy",
      "label": "ROI on study fee",
      "format": "percent",
      "hint": null,
      "primary": false
    },
    {
      "id": "reclassified",
      "label": "Basis reclassified to short-life assets",
      "format": "currency",
      "hint": null,
      "primary": false
    }
  ],
  "worked_example": {
    "inputs": [
      "Building basis (excludes land): 400000 $",
      "% of basis reclassified to short-life assets: 25 %",
      "Bonus depreciation rate this tax year: 60 %",
      "Marginal tax rate: 35 %",
      "Cost segregation study fee: 8000 $"
    ],
    "outputs": [
      "Estimated first-year tax savings: $21,000",
      "First-year depreciation deduction: $60,000",
      "Net benefit after study fee: $13,000",
      "ROI on study fee: 163%",
      "Basis reclassified to short-life assets: $100,000"
    ]
  },
  "how_to": {
    "title": "How to use this",
    "steps": [
      "Enter building basis (excludes land) ($).",
      "Enter % of basis reclassified to short-life assets (%).",
      "Enter bonus depreciation rate this tax year (%).",
      "Enter marginal tax rate (%).",
      "Enter cost segregation study fee ($).",
      "Read your estimated first-year tax savings on the right — it updates as you type.",
      "Hit Share to keep the scenario or send it to someone."
    ]
  },
  "scenarios": [
    {
      "name": "Conservative",
      "description": "Lower-end numbers — what if things land soft?",
      "values": {
        "buildingBasis": 240000,
        "reclassPct": 15,
        "bonusPct": 35,
        "marginalRate": 21,
        "studyFee": 5000
      }
    },
    {
      "name": "Typical",
      "description": "Defaults — the most common real-world setup.",
      "values": {
        "buildingBasis": 400000,
        "reclassPct": 25,
        "bonusPct": 60,
        "marginalRate": 35,
        "studyFee": 8000
      }
    },
    {
      "name": "Ambitious",
      "description": "Higher-end numbers — what if things really pop?",
      "values": {
        "buildingBasis": 640000,
        "reclassPct": 40,
        "bonusPct": 95,
        "marginalRate": 50,
        "studyFee": 13000
      }
    }
  ],
  "limitations": [
    "Results are estimates before tax, fees, and inflation unless an input explicitly covers them.",
    "Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.",
    "This is educational maths, not financial advice. Check anything contractual with the lender or your accountant."
  ],
  "faq": [
    {
      "q": "Is a cost segregation study worth it on a small rental?",
      "a": "Below roughly $300,000-$400,000 in building basis, engineering-based study fees often eat too much of the benefit; a rule-of-thumb allocation or a DIY approach may make more sense. Above that, and especially on multifamily or commercial, the ROI on the study fee is typically 5-15x in year one alone."
    },
    {
      "q": "Does accelerated depreciation increase recapture risk on sale?",
      "a": "Yes. Section 1250 and 1245 recapture taxes back the depreciation you took, generally at ordinary rates up to 25% federal for real property, when you sell. Cost seg trades a smaller near-term tax bill for a larger recapture bill later, which is why pairing it with an eventual 1031 exchange or holding until death for a step-up in basis is the common long-term play."
    },
    {
      "q": "What if I already own the property — can I still do a study?",
      "a": "Yes, through a 'look-back' study and IRS Form 3115 to catch up missed depreciation in the current tax year without amending prior returns. This is common for properties bought several years ago."
    },
    {
      "q": "Why is bonus depreciation phasing down?",
      "a": "The 2017 Tax Cuts and Jobs Act set 100% bonus depreciation to step down 20 points per year starting in 2023 unless Congress extends it. Always confirm the current-year percentage with your CPA before running this calculator, since legislation has changed this rate before."
    }
  ],
  "related": [
    "https://www.revenuelab.fyi/toolbox/depreciation-recapture-sale",
    "https://www.revenuelab.fyi/toolbox/1031-exchange-boot-basis",
    "https://www.revenuelab.fyi/toolbox/equity-multiple-vs-irr"
  ],
  "license": "CC-BY-4.0",
  "citation": "RevenueLab — Cost Segregation First-Year Benefit Calculator (https://www.revenuelab.fyi/toolbox/cost-segregation-first-year)"
}