How the estimate is built
It starts from your depreciable basis: what you paid, less land, which is never depreciable. It then applies the range of basis that cost segregation providers report moving into shorter lives for your property type, and splits that amount two thirds 5-year personal property and one third 15-year land improvements. Both are bonus-eligible.
The bonus rate comes from your contract date. Without a study, the whole basis is depreciated straight line over 27.5 or 39 years from the month you placed the building in service, using the first-year percentages printed in IRS Publication 946 (Table A-6 for 27.5-year residential rental property, Table A-7a for 39-year nonresidential property). With a study, the reclassified amount takes bonus depreciation (and regular MACRS on any part bonus does not cover), and the rest stays on the building schedule. The difference is the added first-year deduction.
The tax effect multiplies that difference by the federal rate you enter. It assumes you can use the deduction this year, which is the assumption most worth testing with your CPA: rental losses are usually passive, the excess business loss limit caps how much a loss can offset other income, and many states do not follow federal bonus depreciation.
Worked example: an illustrative office purchase
The calculator opens on these figures, so you can change any input and watch the range move.
Illustrative first-year deduction for a hypothetical office building
| Item | Amount | How it is computed |
|---|---|---|
| Purchase price | $2,400,000 | Office building, contract signed March 2, 2026, placed in service May 2026 |
| Less land | $480,000 | From the purchase contract allocation |
| Depreciable basis | $1,920,000 | Purchase price less land |
| Reclassified to 5- and 15-year property | $307,000 to $557,000 | 16% to 29% of basis, the reported office range |
| Bonus depreciation rate | 100% | Contract after January 19, 2025 |
| First-year depreciation, no study | $31,000 | Whole basis, 39-year straight line, mid-month (1.605% for May, IRS Pub 946 Table A-7a) |
| First-year depreciation with a study | $333,000 to $579,000 | Reclassified amount at 100%, plus the remaining building |
| Added first-year deduction | $302,000 to $548,000 | With a study less without |
| Federal tax effect at 37%, if usable | $112,000 to $203,000 | Before passive-loss and other limits |
The same building under an earlier contract
Had the contract been signed on November 15, 2024 and the building placed in service in 2026, the bonus rate would be 20% and the added first-year deduction $93,000 to $169,000, against $302,000 to $548,000 above. One date in the purchase file changes the answer, which is why we ask for the contract, not just the closing statement.
Reported reclassification ranges by property type
Ranges other providers publish, shown as reported. They vary widely within a type because buildings do: a medical office with heavy equipment wiring is a different building from a shell office. Treat them as a reason to look, not a forecast. Our study process allocates from your actual costs.
Competitor-reported share of depreciable basis reclassified, by property type
| Property type | Building life | Reported range | Source |
|---|---|---|---|
| Single-family rental | 27.5 years | 9% to 32% | costsegsmart.com 2026 benchmarks |
| Short-term rental | 39 years | 19% to 39% | costsegsmart.com 2026 benchmarks |
| Multifamily (5+ units) | 27.5 years | 14% to 26% | costsegsmart.com 2026 benchmarks |
| Office | 39 years | 16% to 29% | costsegsmart.com 2026 benchmarks |
| Medical or dental office | 39 years | 16% to 29% | costsegsmart.com 2026 benchmarks |
| Retail | 39 years | 20% to 37% | costsegsmart.com 2026 benchmarks |
| Restaurant | 39 years | 16% to 29% | costsegsmart.com 2026 benchmarks |
| Hotel | 39 years | 22% to 45% | Engineered Tax Services hotel range |
| Industrial or warehouse | 39 years | 15% to 28% | costsegsmart.com 2026 benchmarks |
Calculator questions
Why does the calculator ask for the contract date?
Where do the reclassification ranges come from?
Why no present value or 10-year savings figure?
Does this work for a building I bought years ago?
Primary sources
What this page relies on, as reviewed October 2, 2026.
- IRS Notice 2026-11, additional first-year depreciation after P.L. 119-21
- IRS Pub 946, How To Depreciate Property
- 26 U.S.C. §168, accelerated cost recovery system (Cornell LII)
- Cost Seg Smart, 2026 reclassification benchmarks (vendor-reported)
- Engineered Tax Services, hotel cost segregation ranges (vendor-reported)
- Bloomberg Tax, state conformity to federal bonus depreciation (secondary)
Tax law, IRS guidance and state conformity change. Confirm the current rules and how they apply to your property with a qualified professional before acting.