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Most cost segregation studies end as a PDF handed to the CPA. Ours end in the deal model. Edge runs engineering-based cost segregation on acquisitions, new construction, and renovations, then puts the year-one deductions to work: stronger debt service coverage, less equity at close, cleaner tax equity terms, and a capital stack built around cash the building was already generating.
Four changes and elections that make a cost segregation study worth more today than at any point in the last decade.
The 2025 tax act (OBBBA) permanently restored 100% bonus depreciation for qualified property acquired after January 19, 2025. Every component a study moves from the 39-year schedule into 5, 7, or 15-year property can now be deducted in full in the year it is placed in service, rather than phased down as it was in 2023 and 2024.
The new §168(n) qualified production property election lets manufacturers, producers, and refiners deduct the qualifying portion of the building itself in year one, where construction begins before 2029 and the building is placed in service before 2031. Offices, research space, and storage are carved out, so the floor plan decides how much qualifies. Read our analysis →
A building you placed in service years ago can still be studied. Depreciation you missed is caught up in a single current-year deduction through an automatic accounting method change (Form 3115 and a §481(a) adjustment), with no amended returns. For long-held portfolios, the look-back is often the largest number on the table.
When a roof, HVAC system, or interior is replaced, the partial asset disposition election lets the owner deduct the remaining basis of the removed components instead of depreciating demolished assets for decades. It only works if the components were identified, which is exactly what a study does.
Plenty of firms can reclassify a building. Very few sit on the same desk as the lender conversation, the tax equity model, and the exit plan. That is where the study is worth the most.
We run the analysis while the deal is still being priced, so the deductions show up in the debt sizing, the equity requirement, and the sponsor IRR. A study delivered after close saves tax. A study delivered before close changes the terms.
On energy and storage projects, the investment tax credit reduces depreciable basis under §50(c). Studies that ignore that adjustment overstate the benefit and invite a re-trade with the tax equity investor. We model the credit and the study together, so the numbers survive diligence.
For manufacturers, the same square footage that supports an R&D credit can disqualify space from §168(n) expensing. We map production, lab, office, and storage areas against both before the election is made, so you are not trading one benefit away to claim the other.
Accelerated deductions bring recapture on sale. We plan the hold period, disposition strategy, and any exchange structure up front, so the deduction you take this year does not become an unplanned tax bill at exit.
Many states do not follow federal bonus depreciation. We model the state position on its own, so the cash forecast your lender and investors see reflects what you will actually save, not the federal headline.
Year-one savings can retire expensive debt, fund reserves, or reduce the equity a project needs to raise. Because Edge also structures insurance, debt, and investor placement, we can deploy the savings inside the capital stack rather than leave them sitting on the balance sheet.
Cost segregation applies to almost any commercial, industrial, or residential rental property. These are the owners for whom it tends to matter most.
Production plants, process facilities, and warehouses, now with the added §168(n) election for qualifying production space.
Office, retail, grocery-anchored, and mixed-use portfolios where depreciation drives distributions and investor after-tax returns.
Apartment communities, hotels, and short-stay assets with heavy fit-out, fixtures, and site improvements that reclassify well.
Electrical, cooling, and storage infrastructure that sits inside buildings and can carry far shorter lives than the shell around it.
Medical office, outpatient, and care facilities with specialized plumbing, electrical, and equipment-serving systems.
Buildings placed in service in earlier years that were never studied. The look-back catch-up can be claimed in the current year.
Owners mid-renovation who can write off removed components and accelerate the new improvements at the same time.
Buyers of property acquired after January 19, 2025, who qualify for full 100% bonus depreciation on reclassified components.
A study generally makes economic sense where the depreciable building basis, excluding land, is roughly $1M or more. If the numbers on your property do not justify a study, we will tell you on the first call.
A 30-minute call. With the property type, cost basis, and placed-in-service date, we estimate the year-one benefit and confirm whether a study pays for itself.
Site review, drawings, and cost records are analyzed component by component by our credentialed engineering and tax partners, documented to IRS audit standards.
The study goes to your CPA for filing, including Form 3115 where a catch-up applies, and into the lender, tax equity, and investor models where it changes the terms.
We put the savings to work: debt paydown, reserves, reduced equity, or a refinancing built around the improved cash flow.
Not tax or legal advice. Edge Management LLC is not a law firm, CPA firm, or tax advisor. Information on this page is general and educational. Depreciation methods, elections, and outcomes depend on facts specific to each property and taxpayer and should be confirmed with your licensed tax professional, who is responsible for any filing.
Estimates are not guarantees. Reclassification ranges and benefit estimates are typical industry figures, not a representation of the result for any particular property. Actual results depend on the engineering analysis, cost documentation, tax position, and applicable federal and state law at the time of filing.
Recapture and state conformity. Accelerated depreciation may be subject to recapture on disposition, and many states do not conform to federal bonus depreciation. Both should be modelled before relying on any projected benefit.