Cost segregation for A/E firms that own their offices

In short

Architecture and engineering firms that own their building, or paid for their office build-out, often have exactly the records a quality study needs: drawings, specifications and pay applications. Interior improvements are frequently qualified improvement property (15-year straight line, bonus-eligible), and equipment rooms carry dedicated power and cooling. Many of the same firms already claim the R&D credit for their design work.

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A/E offices at a glance

Building life: 39 years
Interior build-out: Often QIP: 15-year straight line
Reported reclassification: 16% to 29%
Best evidence: Your own project file

Range is competitor-reported for office property, not a promise for any building.

What a study looks at in a design firm’s office

Offices are lighter on equipment than a plant or a clinic, so the build-out and the site do more of the work.

A/E office components a study analyzes
Component	How it is analyzed
Interior build-out after the building was first placed in service	Qualified improvement property: 15-year straight-line and bonus-eligible, excluding enlargements, elevators, escalators and internal structural framework.
Server and plotter rooms: dedicated power and cooling	Circuits that serve equipment can be personal property; supplemental cooling moves only when the equipment is its sole justification.
Model shops, labs and testing areas	Equipment-serving utilities, benches and casework analyzed item by item.
Millwork, reception casework, decorative finishes	Weighed under the Whiteco permanence factors; movable and decorative items can be 5- or 7-year.
Parking, walkways, site lighting and landscaping	Land improvements, generally 15-year, for a freestanding building.

General principles, not conclusions for any building.

The R&D credit connection

Performance-driven design work can qualify for the federal R&D credit; aesthetic choices and work your client funds generally do not. We cover that in depth for architecture firms and engineering firms. A firm that owns its office can run both studies on the same records calendar.

If you own the building in a separate entity

Leasing the office from an entity you own raises the self-rental passive-loss question: net rent your firm pays is treated as non-passive income, but a rental loss stays passive (Treas. Reg. §1.469-2(f)(6)). We explain it on the medical and dental page, where it comes up most. Your CPA decides how it applies.

Questions A/E firms ask

We designed the building ourselves. Does that help the study?

Usually a great deal. Drawings, specifications and the contractor’s pay applications are exactly the documentation the IRS guide calls most reliable. A firm that kept its own project file often has a better record than most owners.

We lease our office. Is there anything to study?

If your firm paid for the build-out, yes: those improvements are yours to depreciate, and interior work is often qualified improvement property, depreciated straight line over 15 years and bonus-eligible. A study separates it from items that do not qualify.

Does this affect our R&D credit?

No. The R&D credit covers qualified research wages, supplies and contract research; the office is depreciable property and never part of it. The two studies can be scheduled together because they draw on different records.

Primary sources

What this page relies on, as reviewed October 2, 2026.

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.

Find out what your office could support

Tell us about the property: type, purchase or build date, cost, and who prepares your return. We come back with whether a study looks worthwhile, the documents it would need, and a fixed-fee quote.

[email protected] We typically reply within one business day.

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