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Guest contribution by Blake Collinsworth, National Account Executive, CSSI Services, Inc.
If you own a commercial building or income-producing rental property, the tax code may be handing you deductions far more slowly than it has to. Cost segregation is an IRS-recognized strategy that speeds those deductions up — often putting tens of thousands of dollars back in an owner’s pocket in the first year alone. We asked Blake Collinsworth, of CSSI Services, Inc., how it works.
In plain English, what is cost segregation?
It is a tax strategy that helps property owners pay less tax sooner. The IRS normally treats a building as one asset that depreciates over 27.5 years (residential rental) or 39 years (commercial). But a building is really a bundle of components — lighting, flooring, cabinetry, plumbing, landscaping, parking lots — and the tax code allows many of them to be depreciated over 5, 7, or 15 years instead. A cost segregation study identifies those components, so far more of your deductions land in the early years of ownership, when the money matters most.
How much can an owner expect to save?
Our engineers commonly find that 20 to 40 percent of a building’s value qualifies for shorter depreciation lives. An engineering-based study typically saves owners $30,000 to $80,000 in taxes per $1 million of building value — a significantly smaller tax bill in the early years and immediate cash flow you can reinvest in your business or your next acquisition.
Where does bonus depreciation fit in?
This is where the strategy has become dramatically more powerful. Bonus depreciation lets you write off qualifying short-life property immediately — in year one. The bonus rate had been phasing down (100% for 2018–2022, 80% in 2023, 60% in 2024), but federal tax legislation enacted in July 2025 restored 100% bonus depreciation permanently for qualifying property acquired and placed in service after January 19, 2025. If a study reclassifies $300,000 of a recent purchase into short-life property, the full amount may be deductible in the first year. There has rarely been a better time to look at this.
Who is a good candidate?
Owners of commercial real estate — multi-family, office, retail, medical, and similar properties; residential rental owners, including Airbnb, vacation, short-term, and long-term rentals; and anyone who has purchased, built, or improved a property in recent years. If you own income-producing real estate and pay federal income tax, a study is at least worth a no-cost look.
I’ve owned my building for several years. Is it too late?
Not at all — and you do not have to amend prior returns. The IRS lets you “catch up” the depreciation you could have taken in earlier years through a one-time adjustment on your current return. CSSI prepares the Form 3115 and Section 481(a) adjustment for your tax professional, so the catch-up deduction shows up in the year the study is done.
What does the process look like, and how does my CPA fit in?
Three steps. First, a no-cost preliminary analysis — a complimentary estimate of your potential savings before you commit to anything. Second, the engineering analysis: an on-site inspection reviewing more than 150 building components. Third, delivery of a detailed engineering and tax-based report that meets U.S. tax code guidelines. CSSI has partnered with hundreds of CPA firms; your CPA stays in the driver’s seat, and we supply the documentation and forms that support the accelerated deductions.
Does an engineering-based study hold up with the IRS?
An engineering-based study is the approach the IRS expects. The final report documents building systems valuations and the basis for each reclassification — and, where applicable, related opportunities such as capital-to-expense reversals and partial disposition write-downs. That documentation is precisely what supports the deductions if questions ever arise.
What’s the first step?
Start with the free estimate. Send over basic information about your property and we will show you what a study is likely to save — no cost, no obligation.
Blake Collinsworth
National Account Executive | CSSI Services, Inc.
317-439-2218 | blake.collinsworth@cssiservices.com
Westfield, IN | cssiservices.com/sales/blake-collinsworth
This article is provided for general informational purposes only and does not constitute tax, legal, or accounting advice. Property owners should consult their own tax professional regarding their specific circumstances.