What a study looks at in a clinical building
The question for each item is what it serves: the equipment and the practice, or the building.
| Component | How it is analyzed |
|---|---|
| Dedicated electrical to imaging, sterilization and dental equipment | Wiring, panels and outlets that exist to serve the equipment can be personal property; general building power stays with the building. Allocated circuit by circuit, never by percentage. |
| Plumbing, vacuum and compressed-air lines to operatories | Lines serving dental chairs, sinks in treatment rooms and lab equipment are analyzed by what they serve. Restroom and general building plumbing is structural. |
| Casework, cabinetry and millwork in treatment and lab areas | Movable or equipment-related casework can be 5- or 7-year; built-in items are weighed under the Whiteco factors. |
| Supplemental HVAC for equipment or a process | Moves out of the building only when its sole justification is the equipment, for example dedicated cooling for an imaging room. Comfort cooling stays. |
| Parking, paving, site lighting, signage foundations, landscaping | 15-year land improvements for a freestanding building. |
| Interior build-out of an existing building | Qualified improvement property: 15-year straight-line and bonus-eligible, if placed in service after the building and not an enlargement, elevator, escalator or internal structural framework. |
The self-rental issue, plainly
Many physicians and dentists own the building in an LLC that leases it to the practice. Under Treas. Reg. §1.469-2(f)(6), net rental income from property rented to a business you materially participate in is treated as non-passive. Net losses from the same rental are not given the same treatment; they stay passive.
A study that front-loads depreciation can turn a rental that shows income into one that shows a loss, and that loss may only offset other passive income. It still carries forward, and it is still worth having, but the timing of the benefit changes. Some owners can group the rental and the practice into one activity; that depends on ownership and facts, and is a decision for your CPA.
If you also run research
Practices that develop devices, protocols or software can have a federal R&D credit as well. The building study and the R&D study cover different costs, and depreciable property is never a qualified research expense. Read the R&D tax credit guide and the industries we cover.
Renovations and replacements
A renovation can do two things at once: new build-out to classify, and old components to write off through a partial disposition election on a timely filed original return. Both need the cost records, so send the contractor’s pay applications with the assessment request.
Questions practice owners ask
We lease the building from our own LLC. Does a study still help?
We are a tenant. Can we do cost segregation on our build-out?
What if we replaced the roof or HVAC on a building we already depreciate?
Primary sources
What this page relies on, as reviewed October 2, 2026.
- IRS Pub 5653, Cost Segregation Audit Techniques Guide (rev. 2-2025)
- 26 U.S.C. §168, accelerated cost recovery system (Cornell LII)
- Treas. Reg. §1.168(i)-8, partial dispositions (Cornell LII)
- 26 U.S.C. §469, passive activity losses (Cornell LII)
- Cost Seg Smart, 2026 reclassification benchmarks (vendor-reported)
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.