Last Updated on 08/25/2026
If you or your clients are considering cost segregation studies before the October 15, 2026 tax deadline, it is important to begin the process early. The period leading up to major tax deadlines is one of the busiest times of year, so starting now can help avoid filing delays.
Key Takeaways
- There is still time to complete a study, but turnaround depends on the complexity of the property and how quickly purchase documents, construction records, and other requested information are provided.
- Now is the time to begin. Traditional engineering-based cost segregation studies generally take 30 to 45 days to complete. Property owners planning to file by the extended October 15, 2026 tax filing deadline should begin the process early to allow adequate time for the study and incorporation into their tax return.
- KBKG provides comprehensive engineering-based studies for larger or more complex properties. For properties with a depreciable basis of less than $1.5 million (less land), KBKG offers CostSegregation.com, which is a a self-guided, technology driven solution capable of generating a cost segregation report in minutes, providing faster and more cost-effective alternative for qualifying properties.
What is Cost Segregation?
Cost segregation is a tax planning strategy that enables commercial and residential property owners to accelerate depreciation deductions by identifying and reclassifying building components into shorter recovery periods of 5, 7, or 15 years rather than depreciating the building over 27.5 or 39 years. A cost segregation study, performed by qualified engineers and tax professionals, help identify these components and support accelerated depreciation deductions.
How Long Will It Take to Complete the Study?
According to KBKG’s experts, a typical cost segregation study takes 30 to 45 days to complete, depending on property complexity and documentation availability. However, the actual timeline depends on how quickly property owners provide the required information.
How Much Can Be Saved?
Cost segregation is generally most beneficial for property owners who are paying federal income tax. Potential savings depend on the property’s purchase price, building use, and year acquired. For example, a $1 million commercial property could yield $100,000 to $300,000 in accelerated first-year depreciation deductions.
Property owners can use the free Cost Segregation Savings Calculator from KBKG, to obtain an initial estimate. For a more detailed estimate, they can request a free analysis and formal proposal.
What Is Involved in a Cost Segregation Study?
A detailed cost segregation study typically involves:
- Review of property cost basis details and purchase documents
- Analysis of blueprints and construction records
- Property appraisal review
- Interviews with property management
- Physical on-site property inspection
If those materials are not available, a study may still be performed by estimating component values during an on-site inspection.
To meet the October 15, 2026 tax deadline, property owners should initiate the cost segregation study process no later than the end of August and notify KBKG as early as possible if they are interested in pursuing cost segregation studies.
If you, or your CPA, are ready to begin your study, please request a free, no obligation consultation to get the process started!
Frequently Asked Questions
Is cost segregation only for large commercial properties?
No. Cost segregation may benefit many types of income-producing real estate, including apartment buildings, rental homes, offices, retail properties, restaurants, hotels, warehouses, medical facilities, and self-storage properties. Whether it is worthwhile depends on the property’s building basis, asset mix, tax position, and expected holding period.
If you or your client’s property is worth under $1.5m (excluding land), we would recommend using CostSegregation.com, a self-guided software built and backed by KBKG.
Does cost segregation create new tax deductions?
No. Cost segregation generally does not create additional depreciable basis. Instead, it identifies building components that may qualify for shorter 5-, 7-, or 15-year recovery periods, allowing owners to claim certain deductions sooner rather than spreading them over 27.5 or 39 years.
What is the difference between cost segregation and bonus depreciation?
Cost segregation identifies and reclassifies eligible building components into shorter recovery periods. Bonus depreciation is a separate tax regulation that may allow some of those shorter-life assets to be deducted more quickly. A cost segregation study determines which assets may qualify, while the taxpayer and tax advisor determine how current bonus depreciation rules apply.