Study Overview
A multifamily property acquired in 2025 for $62,000,000 became a powerful example of what strategic tax planning can do. Through a cost segregation study applied in the 2025 tax year, combined with 100% bonus depreciation, eligible building components were reclassified into shorter recovery periods, generating $3,631,486 in first-year tax savings.
| Property Type | Multifamily |
| First-Year Tax Savings | $3,631,486 |
| Date Placed In-Service | Sept. 2025 |
| Tax year study applied | 2025 |
| Bonus depreciation | 100% |
| Purchase price(less land) | $62,000,000 |
| Accelerated Method | $10,472,658 |
| Straight-Line Method | $657,824 |
| Increased Deduction | $9,814,834 |
| Tax Rate | 37% |
Project Overview
A multifamily property owner partnered with CSSI to complete a cost segregation study, and the results spoke for themselves. Through a detailed engineering analysis, a significant portion of the property’s building costs were reclassified from a 27.5-year schedule into shorter recovery periods, accelerating deductions and putting real money back in the owner’s pocket sooner.
Study Results
The detailed engineering analysis successfully reclassified 26% of the total building costs into accelerated depreciation categories:
*Also refer to “Building Allocation After Study” Graph Below
Key Reclassified Assets
5-Year Property ($9,300,078) included:
- Carpeting and specialty flooring
- Appliances (refrigerators, ranges, dishwashers, microwaves)
- Window treatments and blinds
- Cabinets and countertops (when classified as personal property)
- Decorative lighting fixtures
- Security systems and cameras
- Electrical outlets and wiring dedicated to appliances
15-Year Land Improvements ($1,240,010) included:
- Sidewalks and walkways
- Parking lots and paving
- Landscaping and irrigation systems
- Outdoor lighting
- Fencing and gates
- Swimming pools and recreational amenities
- Site utilities (serving land improvements)
Building Allocation After Study
5-Year
$9,300,078 Re-allocated
15-Year
$1,240,010 Re-allocated
27.5-Year
$52,080,437 Re-allocated
Financial Impact
By accelerating depreciation on $62,000,000 of the property’s cost basis, the cost segregation study generated substantial first-year deductions and meaningfully improved cash flow. Through the identification of personal property and land improvements, the multifamily owner was able to take advantage of:
- Bonus depreciation eligibility on qualifying assets
- Accelerated depreciation schedules on shorter-life property
- Enhanced cash flow through reduced tax liability
- Proper cost basis documentation for future disposition analysis
Building Systems Documentation
The study also included thorough documentation of the property’s building systems, a valuable resource for making informed capitalize-vs.-expense decisions in line with IRS Tangible Property Regulations. This documentation gives property owners:
- Current replacement cost benchmarks for each building system
- Detailed asset inventories by depreciable life
- Support for partial disposition elections on future improvements
- Compliance with IRC Section 1.263(a)-3 requirements
Compliance & Methodology
The study was conducted in full accordance with:
- IRS Revenue Procedure 87-56 asset classification guidelines
- Modified Accelerated Cost Recovery System (MACRS) regulations
- IRC Section 168 property classification standards
- Tangible Property Final Regulations (Treasury Decision 9636)
All asset classifications were supported by site inspection, architectural plans, construction documentation, and established engineering cost analysis standards designed to withstand IRS scrutiny.
Why This Matters
For multifamily property owners, a cost segregation study can be one of the most impactful tax strategies available. This case study shows exactly that, by reclassifying eligible assets into shorter recovery periods, the owner captured substantial first-year deductions and improved cash flow, with full IRS compliance built into every step.
Ready to discover your property’s tax savings potential? Contact CSSI today.
