Study Overview
This case study examines a Duplex property acquired in 2021 for $406,786 and applied in the 2025 tax year. By also leveraging 100% bonus depreciation, the cost segregation study reclassified eligible building components into shorter recovery periods, maximizing upfront tax savings resulting in $33,749 in savings.
| Property Type | Duplex |
| First-Year Tax Savings | $33,749 |
| Date Placed In-Service | Oct. 2021 |
| Tax year study applied | 2025 |
| Bonus depreciation | 100% |
| Purchase price(less land) | $406,786 |
| Accelerated Method | $153,460 |
| Straight-Line Method | $62,256 |
| Increased Deduction | $91,213 |
| Tax Rate | 37% |
Project Overview
A duplex owner completed a CSSI cost segregation study, identifying assets eligible for accelerated depreciation. Through a detailed engineering analysis, a significant portion of building costs were reclassified from a 27.5-year depreciation schedule to much shorter recovery periods, putting 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 ($85,425) included:
- Carpeting and specialty flooring
- Appliances (refrigerators, stoves, dishwashers, washers/dryers)
- Window treatments and blinds
- Certain electrical outlets and dedicated circuits
- Decorative lighting fixtures
- Cabinetry (when deemed personal property)
15-Year Land Improvements ($20,339) included:
- Sidewalks and walkways
- Parking lots and paving
- Landscaping and plantings
- Irrigation and drainage systems
- Fencing and gates
- Dumpster enclosures
- Site utilities (to the extent they serve the land, not the structure)
Building Allocation After Study
5-Year
$85,425 Re-allocated
15-Year
$20,339 Re-allocated
27.5-Year
$301,021 Re-allocated
Financial Impact
By accelerating depreciation on $406,786 of the property’s cost basis, the study generated substantial first-year tax deductions and meaningfully improved cash flow. Through the identification of personal property and land improvements, the 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
This case study illustrates how duplex owners can unlock meaningful tax savings through a properly executed cost segregation study. By identifying and reclassifying nearly $406,786 in assets eligible for accelerated depreciation, the property owner captured significant first-year tax benefits, all while remaining fully compliant with IRS guidelines.
Ready to discover your property’s tax savings potential? Contact CSSI today.
