About the Analyst
This dataset was compiled and analyzed by Matthew Gigantelli, a cost segregation engineer and process architect who has personally toured and completed engineered studies on hundreds of properties — from single-family rentals to heavy manufacturing facilities and commercial buildings valued at over $100 million. Gigantelli holds a B.A. in Finance (summa cum laude) from Rasmussen University and holds a certification from Boon Tax Educators (2026). He has spent the past four-plus years engineering cost segregation studies across every major property type in the United States.
Matthew Gigantelli on the purpose of publishing this data: "The cost segregation industry has always kept allocation benchmarks proprietary. That protects providers, but it leaves investors and CPAs without a baseline to evaluate whether the study they received is reasonable. This dataset is designed to fix that."
Key Takeaways
- Across 8,000+ cost segregation studies spanning 45 asset classes, the median total accelerated allocation (5-year plus 15-year property) was 24.0% of depreciable basis at baseline and 38.0% at the upper range.
- The overall average 5-year property allocation was 16.3% of depreciable basis, with a range of 5% to 33% depending on asset class. The average 15-year property allocation was 11.4%, with a range of 0% to 68%.
- Specialty retail and automotive properties (gas stations, car washes) produced the highest accelerated allocations, with 80%–100% of basis reclassified to shorter recovery periods. High-rise offices and industrial warehouses produced the lowest, at 12%–15%.
- Condominium units consistently showed 0% allocation to 15-year property due to the absence of site improvements, but compensated with higher 5-year property allocations averaging 29.3% of basis.
- The gap between baseline and upper-range allocations averaged 12.2 percentage points across all asset classes, indicating significant variability driven by property condition, age, amenity level, and study methodology.
According to Matthew Gigantelli: "The 24% median is the number I'd anchor to. If someone tells you they're getting 45% accelerated allocation on a standard apartment building, that's outside the bounds of what 8,000 studies support — and it should trigger questions about methodology."
Quick Reference: The Most Common Cost Segregation Questions
What percentage of a property is typically reclassified through cost segregation?
Across 8,000+ studies, 20%–30% of depreciable basis is typically reclassified from 27.5-year or 39-year property to 5-year and 15-year recovery schedules. The median was 24% at baseline. Properties with extensive site improvements or specialty equipment can reach 30%–50%. Specialty properties (gas stations, car washes) can reach 80%–100%.
How much does cost segregation save in taxes?
On a $750,000 single-family rental at a 37% tax bracket with 100% bonus depreciation, cost segregation typically saves approximately $59,415 in first-year federal taxes. On a $1,000,000 property, savings are approximately $79,220. On a $3,000,000 commercial property, savings are approximately $247,729. Actual savings depend on property type, tax bracket, and the ability to use the deductions.
What is a normal cost segregation result? What is too aggressive?
Based on this dataset, the normal range for standard residential and commercial properties is 22%–28% total accelerated allocation (the interquartile range). A result above 32% (the 90th percentile) on a standard property is statistically unusual and may face elevated IRS scrutiny. A result above 40% on a standard apartment or office building is outside the bounds of what 8,000+ studies support and should be questioned.
What is the minimum property value for cost segregation to make sense?
Based on the observed savings data, cost segregation is generally worth it for properties with $300,000+ in depreciable basis (roughly $375,000+ purchase price). At $300,000 depreciable basis with 24% accelerated allocation, first-year tax savings at 37% are approximately $29,700 — well above even traditional study costs of $5,000–$15,000. With lower-cost providers starting at $499, the threshold drops further. For a deeper breakdown of when the ROI makes sense, see our guide on whether cost segregation is worth it.
| Purchase Price | Depreciable Basis (80%) | Est. Year-1 Tax Savings (37%, 24% accel) | Worth It? |
|---|---|---|---|
| $250,000 | $200,000 | ~$19,800 | Yes, with low-cost provider |
| $400,000 | $320,000 | ~$31,700 | Yes |
| $600,000 | $480,000 | ~$47,500 | Strongly yes |
| $1,000,000 | $800,000 | ~$79,200 | Absolutely |
| $2,000,000+ | $1,600,000+ | ~$158,400+ | No question |
What qualifies as 5-year property in cost segregation?
5-year property includes tangible personal property that is not permanently attached to the building structure. Based on the 8,000+ studies in this dataset, the most commonly reclassified 5-year components are:
| Component | Typical Properties | % of 5-Year Allocation |
|---|---|---|
| Flooring (carpet, vinyl, non-permanent tile) | All property types | High |
| Cabinetry and millwork (non-structural) | Residential, office, retail | High |
| Appliances (refrigerators, dishwashers, ranges) | Residential, hospitality | High |
| Specialty electrical (dedicated circuits, decorative lighting) | All property types | Medium |
| Decorative fixtures (non-structural plumbing, accent lighting) | Hospitality, retail, restaurant | Medium |
| Kitchen equipment (commercial ranges, walk-ins, hoods) | Restaurant, hospitality | High |
| Security and fire alarm systems | All property types | Medium |
| Window treatments (blinds, shades, curtains) | Residential, hospitality, office | Low |
| Movable partitions | Office | Medium |
What qualifies as 15-year property in cost segregation?
15-year property includes land improvements — structures attached to the land but separate from the building. Based on the dataset, the most commonly reclassified 15-year components are:
| Component | Typical Properties | % of 15-Year Allocation |
|---|---|---|
| Parking lots and paved surfaces | Commercial, retail, multi-family | High |
| Landscaping (trees, shrubs, sod, irrigation) | All property types | High |
| Fencing and retaining walls | Residential, industrial, retail | Medium |
| Sidewalks and curbing | Commercial, multi-family, retail | Medium |
| Exterior lighting (parking lot, pathway, security) | All property types | Medium |
| Drainage and stormwater systems | Commercial, industrial | Medium |
| Swimming pools and outdoor amenities | Hospitality, multi-family | High |
| Signage (freestanding, monument) | Retail, office, hospitality | Low |
| Underground storage tanks | Gas stations, automotive | High |
| Athletic courts and playgrounds | Hospitality, multi-family, daycare | Low |
The key distinction: 5-year property is inside the building (personal property). 15-year property is outside the building (land improvements). Building structure (foundation, walls, roof, permanent HVAC, core plumbing, core electrical) remains at 27.5 or 39 years.
Dataset Overview
This analysis draws on benchmark allocation data compiled by Matthew Gigantelli from more than 8,000 cost segregation studies completed over a 5-year period. The dataset covers 45 distinct asset classes organized into 7 property categories:
| Category | Asset Classes | Examples |
|---|---|---|
| Single-Family Residential | 6 | Standalone homes, townhouses, condos, ADUs, cabins, small multi-family (2–4 units) |
| Multi-Family Residential | 6 | Garden apartments, mid-rise, high-rise, apartment complexes, mixed-use |
| Office | 9 | Low-rise, mid-rise, high-rise, office parks, medical offices, flex space |
| Retail | 8 | Strip centers, shopping centers, standalone retail, restaurants, gas stations |
| Automotive | 3 | Repair shops, dealerships, car washes |
| Hospitality | 7 | Hotels, motels, resorts, RV parks, assisted living, daycare, country clubs |
| Industrial | 6 | Manufacturing, warehouses, self-storage (4 subtypes) |
Each asset class includes two allocation tiers:
- Baseline allocation: The conservative, defensible allocation applicable to typical properties in the asset class.
- Upper-range allocation: The allocation achievable on properties with above-average amenities, newer construction, or more detailed engineering analysis.
All percentages represent the share of depreciable basis (purchase price minus land value) allocated to each recovery period under the Modified Accelerated Cost Recovery System (MACRS).
Asset Allocation Benchmarks: Overall
Summary Statistics
Across all 45 asset classes, the following allocation benchmarks were observed:
| Recovery Period | Baseline Mean | Baseline Median | Baseline Range | Upper Mean | Upper Median | Upper Range |
|---|---|---|---|---|---|---|
| 5-year property | 16.3% | 14.0% | 5%–33% | 24.4% | 22.0% | 12%–42% |
| 15-year property | 11.4% | 8.0% | 0%–68% | 15.5% | 12.0% | 0%–66% |
| Real property (27.5/39-year) | 71.8% | 76.0% | 0%–88% | 60.0% | 62.0% | 0%–78% |
| Total accelerated (5+15) | 27.7% | 24.0% | 12%–100% | 40.0% | 38.0% | 22%–100% |
Across 8,000 studies, the average total accelerated allocation was 27.7% of depreciable basis at baseline. According to Matthew Gigantelli, who compiled the dataset: "For a typical property, approximately one-quarter to one-third of the depreciable basis can be reclassified from long-life real property to 5-year or 15-year recovery schedules. That range has been remarkably stable across the thousands of studies in this dataset."
Percentile Distribution
The following percentiles describe the distribution of total accelerated allocation (5-year plus 15-year combined) at baseline:
| Percentile | Baseline Accelerated | Upper-Range Accelerated |
|---|---|---|
| 10th | 15.4% | 26.8% |
| 25th | 22.0% | 32.0% |
| 50th (median) | 24.0% | 38.0% |
| 75th | 28.0% | 42.0% |
| 90th | 32.0% | 49.6% |
The interquartile range (25th to 75th percentile) for baseline accelerated allocation was 22.0% to 28.0%. The 90th percentile reached 32.0% at baseline and 49.6% at the upper range, indicating that roughly one in ten asset classes supports reclassification of nearly half the depreciable basis.
Allocation by Property Category
Single-Family Residential
Single-family residential properties encompass 6 asset classes: standalone homes, townhouses, condos, ADUs, cabins, and small multi-family (2–4 units).
| Asset Class | Base 5-Year | Base 15-Year | Base Real Property | Upper 5-Year | Upper 15-Year | Upper Real Property |
|---|---|---|---|---|---|---|
| Standalone Single Family | 16% | 8% | 76% | 22% | 12% | 66% |
| Townhouse / Rowhouse | 16% | 2% | 82% | 20% | 5% | 75% |
| Residential Condo Unit | 33% | 0% | 67% | 40% | 0% | 60% |
| Small Multi-Family (2–4 units) | 18% | 6% | 76% | 24% | 10% | 66% |
| Accessory Dwelling Unit (ADU) | 14% | 2% | 84% | 20% | 8% | 72% |
| Cabin / Cottage | 12% | 2% | 86% | 16% | 6% | 78% |
Category averages: 5-year property at 18.2%, 15-year property at 3.3%, total accelerated at 21.5% of basis (baseline).
The average total accelerated allocation for single-family residential was 21.5% at baseline and 30.5% at the upper range.
Standalone single-family homes allocated 16% to 5-year property and 8% to 15-year property at baseline, reflecting typical components such as flooring, cabinets, appliances, and site improvements like driveways, fencing, and landscaping.
Residential condo units are a notable outlier. Because condo owners typically have no basis in site improvements (land, parking, and landscaping are owned by the association), 15-year property allocation is 0%. However, condo units show the highest 5-year property allocation in the category at 33% baseline, driven by a higher concentration of interior personal property relative to total basis.
Matthew Gigantelli notes: "The condo pattern is one of the most misunderstood dynamics in cost segregation. People see 0% land improvement allocation and assume condos are bad candidates. The opposite is true — the absence of site basis concentrates everything into interior components, and those are the assets that qualify for 5-year recovery."
Cabins and cottages produced the lowest total accelerated allocation in the category at 14% baseline, reflecting simpler construction with fewer separable personal property components. For investors using these property types as short-term rentals, the tax strategy extends beyond cost segregation — see our short-term rental cost segregation guide for STR-specific considerations.
Multi-Family Residential
Multi-family residential covers 6 asset classes ranging from garden-style apartments to high-rise towers and mixed-use buildings.
| Asset Class | Base 5-Year | Base 15-Year | Base Real Property | Upper 5-Year | Upper 15-Year | Upper Real Property |
|---|---|---|---|---|---|---|
| Medium Multi-Family (5–20 units) | 16% | 6% | 78% | 22% | 10% | 68% |
| Apartment Complex (with Clubhouse) | 18% | 12% | 70% | 24% | 16% | 60% |
| Apartment (basic amenities) | 18% | 6% | 76% | 22% | 10% | 68% |
| Mid-Rise Apartment (≤6 stories) | 14% | 4% | 82% | 20% | 6% | 74% |
| High-Rise Apartment (7+ stories) | 14% | 2% | 84% | 18% | 4% | 78% |
| Mixed-Use (Apts + Retail) | 14% | 8% | 78% | 22% | 12% | 66% |
Category averages: 5-year property at 15.7%, 15-year property at 6.3%, total accelerated at 22.0% of basis (baseline).
The average total accelerated allocation for multi-family residential was 22.0% at baseline and 31.0% at the upper range.
Apartment complexes with clubhouses, pools, and structured parking produced the highest accelerated allocation in the category at 30% baseline (18% five-year, 12% fifteen-year). The amenity infrastructure — pool equipment, clubhouse fixtures, fitness equipment, exterior lighting, and parking lot surfaces — contributes significant 15-year property allocation.
High-rise apartments produced the lowest at 16% baseline. Taller buildings have a higher ratio of structural components (elevator shafts, reinforced concrete, fire suppression) to separable personal property, compressing the 5-year allocation. Limited site improvements further reduce the 15-year allocation.
For a detailed comparison of how these allocation differences affect investment returns across property types, see our guide on multifamily vs. single-family cost segregation.
Office
The office category spans 9 asset classes, the most granular of any category in the dataset.
| Asset Class | Base 5-Year | Base 15-Year | Base Real Property | Upper 5-Year | Upper 15-Year | Upper Real Property |
|---|---|---|---|---|---|---|
| Low-Rise Office (under 4 stories) | 12% | 8% | 80% | 20% | 12% | 68% |
| Mid-Rise Office (5–12 stories) | 12% | 6% | 82% | 20% | 10% | 70% |
| High-Rise Office (13+ stories) | 10% | 2% | 88% | 16% | 6% | 78% |
| Office Park / Campus | 14% | 12% | 74% | 22% | 16% | 62% |
| Office Condo Unit | 28% | 0% | 72% | 42% | 0% | 58% |
| Converted House Office | 14% | 8% | 78% | 22% | 12% | 66% |
| Medical Office Building | 14% | 8% | 78% | 22% | 12% | 66% |
| Medical Office Condo | 28% | 0% | 72% | 42% | 0% | 58% |
| Flex Office / Warehouse | 5% | 10% | 85% | 12% | 16% | 72% |
Category averages: 5-year property at 15.2%, 15-year property at 6.0%, total accelerated at 21.2% of basis (baseline).
The average total accelerated allocation for office properties was 21.2% at baseline and 33.6% at the upper range.
Office condo units and medical office condos achieved 28% 5-year allocation at baseline — the highest in the office category — because, like residential condos, the absence of site improvement basis concentrates the allocation in interior personal property (carpet, specialty electrical, millwork, data cabling).
Office parks and campus-style developments achieved the highest combined accelerated allocation among non-condo office properties at 26% baseline, driven by extensive 15-year property: parking lots, sidewalks, landscaping, exterior lighting, and retaining walls.
High-rise offices at 12% baseline had the lowest accelerated allocation of any office type and one of the lowest across all 45 asset classes. Structural steel, elevator systems, and curtain wall construction dominate the cost basis with minimal separable personal property.
According to Gigantelli: "I've walked high-rise office towers where 85%+ of the construction cost is in the core and shell — structural steel, concrete, the elevator bank, the curtain wall. There's simply less to reclassify. A low-rise office park with extensive parking, landscaping, and tenant build-outs is a completely different story."
Flex office/warehouse properties allocated only 5% to 5-year property — the lowest 5-year allocation in the dataset — reflecting open-plan, minimally finished interiors. However, their 10% 15-year allocation (loading areas, paving, fencing) partially compensates.
Retail
Retail includes 8 asset classes with the widest allocation variance of any category.
| Asset Class | Base 5-Year | Base 15-Year | Base Real Property | Upper 5-Year | Upper 15-Year | Upper Real Property |
|---|---|---|---|---|---|---|
| Retail Strip Center | 14% | 8% | 78% | 22% | 12% | 66% |
| Shopping Center / Power Center | 14% | 12% | 74% | 22% | 16% | 62% |
| Retail Condo Unit | 28% | 0% | 72% | 42% | 0% | 58% |
| Standalone Retail | 14% | 8% | 78% | 22% | 12% | 66% |
| Gas Station (Fuel Only) | 32% | 68% | 0% | 42% | 58% | 0% |
| Gas Station (with C-Store) | 27% | 53% | 20% | 34% | 66% | 0% |
| Restaurant – Quick Service | 22% | 8% | 70% | 32% | 12% | 56% |
| Restaurant – Full Service | 20% | 8% | 72% | 30% | 12% | 58% |
Category averages: 5-year property at 21.4%, 15-year property at 20.6%, total accelerated at 42.0% of basis (baseline).
The average total accelerated allocation for retail was 42.0% at baseline and 54.2% at the upper range — the highest of any property category.
Retail's elevated averages are driven by two extreme outliers: gas stations.
Fuel-only gas stations allocated 100% of basis to accelerated property at baseline (32% five-year, 68% fifteen-year), with 0% allocated to real property. This reflects the nature of the asset: canopies, underground storage tanks, pump islands, and paved surfaces are classified as either 5-year or 15-year property under MACRS. There is no building structure.
Matthew Gigantelli on gas stations: "A fuel-only gas station is the extreme case — literally 100% of the depreciable basis goes to accelerated schedules because there is no building. It's canopies, tanks, pumps, and pavement. When people ask me what the maximum possible cost segregation benefit is, this is it."
Gas stations with convenience stores allocated 80% to accelerated property at baseline. The convenience store building accounts for the 20% real property allocation.
Excluding gas stations, the retail category averaged 18.7% total accelerated allocation at baseline — consistent with other commercial categories.
Restaurants produced higher 5-year allocations than standard retail (20%–22% vs. 14%) due to commercial kitchen equipment, walk-in refrigeration, specialty plumbing, and dining furniture.
Automotive
The automotive category covers 3 asset classes with wide variance driven by the car wash subtype.
| Asset Class | Base 5-Year | Base 15-Year | Base Real Property | Upper 5-Year | Upper 15-Year | Upper Real Property |
|---|---|---|---|---|---|---|
| Automotive Repair | 16% | 10% | 74% | 24% | 14% | 62% |
| Auto Dealership | 16% | 12% | 72% | 24% | 16% | 60% |
| Car Wash | 28% | 62% | 10% | 42% | 58% | 0% |
Category averages: 5-year property at 20.0%, 15-year property at 28.0%, total accelerated at 48.0% of basis (baseline).
Car washes allocated 90% of basis to accelerated property at baseline. Tunnel equipment, conveyor systems, water recycling infrastructure, and extensive paving drive the high 15-year allocation. At the upper range, 100% of basis was allocated to accelerated property.
Automotive repair shops and dealerships produced more moderate allocations (26%–28% total accelerated at baseline), with 15-year property including large paved lots, display lighting, and site drainage.
Hospitality
Hospitality encompasses 7 asset classes from economy motels to full-service resorts and specialized facilities.
| Asset Class | Base 5-Year | Base 15-Year | Base Real Property | Upper 5-Year | Upper 15-Year | Upper Real Property |
|---|---|---|---|---|---|---|
| Hotel (Full Service) | 16% | 10% | 74% | 24% | 14% | 62% |
| Motel (Limited Service) | 14% | 8% | 78% | 22% | 12% | 66% |
| Resort | 16% | 10% | 74% | 24% | 16% | 60% |
| RV Park / Campground | 12% | 20% | 68% | 20% | 32% | 48% |
| Assisted Living / Senior Housing | 14% | 10% | 76% | 22% | 16% | 62% |
| Daycare / Childcare Center | 14% | 10% | 76% | 22% | 16% | 62% |
| Country Club | 14% | 10% | 76% | 22% | 14% | 64% |
Category averages: 5-year property at 14.3%, 15-year property at 11.1%, total accelerated at 25.4% of basis (baseline).
The average total accelerated allocation for hospitality was 25.4% at baseline and 39.4% at the upper range.
RV parks and campgrounds were the hospitality outlier, with 32% total accelerated allocation at baseline driven by a 20% 15-year property allocation — the highest 15-year allocation in the hospitality category. Utility hookups, gravel pads, bathhouse structures, and extensive paving contribute to this allocation.
Hotels and resorts produced consistent 26% total accelerated allocation at baseline. FF&E (furniture, fixtures, and equipment), specialty lighting, pool equipment, and restaurant build-outs drive the 5-year allocation, while parking structures, landscaping, and exterior amenities contribute the 15-year component.
Limited-service motels produced lower allocations (22% baseline) reflecting simpler construction, fewer amenities, and lower-grade interior finishes.
Industrial
Industrial covers 6 asset classes including manufacturing, warehousing, and four self-storage subtypes.
| Asset Class | Base 5-Year | Base 15-Year | Base Real Property | Upper 5-Year | Upper 15-Year | Upper Real Property |
|---|---|---|---|---|---|---|
| Industrial Facility | 5% | 10% | 75% | 12% | 16% | 72% |
| Warehouse / Distribution Center | 5% | 10% | 75% | 12% | 16% | 72% |
| Self-Storage – Premium Climate-Controlled | 14% | 8% | 78% | 26% | 12% | 62% |
| Self-Storage – Standard Mixed | 16% | 10% | 74% | 28% | 14% | 58% |
| Self-Storage – Basic Drive-Up | 12% | 20% | 68% | 24% | 34% | 42% |
| Self-Storage – Economy / Converted | 10% | 18% | 72% | 18% | 28% | 54% |
Category averages: 5-year property at 10.3%, 15-year property at 12.7%, total accelerated at 23.0% of basis (baseline).
The average total accelerated allocation for industrial was 23.0% at baseline and 40.0% at the upper range.
Industrial facilities and warehouses produced the lowest 5-year property allocations in the entire dataset at 5% baseline. These properties are predominantly structural: concrete slab, steel frame, metal siding, and roof. Interior improvements are minimal. The 10% 15-year allocation reflects loading docks, paving, fencing, and drainage systems.
Gigantelli observes: "Warehouses are the one property type where I regularly tell investors to check the math before ordering a study. At 5% five-year allocation, you need a large enough basis for the absolute dollar benefit to justify the cost. On a $5 million warehouse, it works. On a $500,000 warehouse, you should run the numbers carefully."
Self-storage facilities showed significant internal variance depending on construction type. Basic drive-up facilities allocated 32% to accelerated property at baseline, driven by extensive paving and minimal building structure. Premium climate-controlled facilities allocated 22% at baseline, with higher 5-year property (security systems, climate control units, interior partitions) but lower 15-year property relative to drive-up variants.
Accelerated Allocation Rankings: Highest to Lowest
The following table ranks all 45 asset classes by total baseline accelerated allocation (5-year plus 15-year property combined):
| Rank | Asset Class | Category | Base Accelerated | Upper Accelerated |
|---|---|---|---|---|
| 1 | Gas Station (Fuel Only) | Retail | 100% | 100% |
| 2 | Car Wash | Automotive | 90% | 100% |
| 3 | Gas Station (with C-Store) | Retail | 80% | 100% |
| 4 | Residential Condo Unit | SFR | 33% | 40% |
| 5 | RV Park / Campground | Hospitality | 32% | 52% |
| 6 | Restaurant – Quick Service | Retail | 30% | 44% |
| 7 | Apartment Complex (with Clubhouse) | Multi-Family | 30% | 40% |
| 8 | Self-Storage – Basic Drive-Up | Industrial | 32% | 58% |
| 9 | Restaurant – Full Service | Retail | 28% | 42% |
| 10 | Self-Storage – Economy / Converted | Industrial | 28% | 46% |
| 11 | Office Condo Unit | Office | 28% | 42% |
| 12 | Medical Office Condo | Office | 28% | 42% |
| 13 | Retail Condo Unit | Retail | 28% | 42% |
| 14 | Auto Dealership | Automotive | 28% | 40% |
| 15 | Self-Storage – Standard Mixed | Industrial | 26% | 42% |
| 16 | Hotel (Full Service) | Hospitality | 26% | 38% |
| 17 | Resort | Hospitality | 26% | 40% |
| 18 | Office Park / Campus | Office | 26% | 38% |
| 19 | Automotive Repair | Automotive | 26% | 38% |
| 20 | Standalone Single Family | SFR | 24% | 34% |
| 21 | Small Multi-Family (2–4 units) | SFR | 24% | 34% |
| 22 | Apartment (basic amenities) | Multi-Family | 24% | 32% |
| 23 | Assisted Living / Senior Housing | Hospitality | 24% | 38% |
| 24 | Daycare / Childcare Center | Hospitality | 24% | 38% |
| 25 | Country Club | Hospitality | 24% | 36% |
| 26 | Retail Strip Center | Retail | 22% | 34% |
| 27 | Shopping Center / Power Center | Retail | 26% | 38% |
| 28 | Standalone Retail | Retail | 22% | 34% |
| 29 | Self-Storage – Premium Climate-Controlled | Industrial | 22% | 38% |
| 30 | Medium Multi-Family (5–20 units) | Multi-Family | 22% | 32% |
| 31 | Mixed-Use (Apts + Retail) | Multi-Family | 22% | 34% |
| 32 | Medical Office Building | Office | 22% | 34% |
| 33 | Converted House Office | Office | 22% | 34% |
| 34 | Motel (Limited Service) | Hospitality | 22% | 34% |
| 35 | Low-Rise Office (under 4 stories) | Office | 20% | 32% |
| 36 | Townhouse / Rowhouse | SFR | 18% | 25% |
| 37 | Mid-Rise Apartment (≤6 stories) | Multi-Family | 18% | 26% |
| 38 | Mid-Rise Office (5–12 stories) | Office | 18% | 30% |
| 39 | Accessory Dwelling Unit (ADU) | SFR | 16% | 28% |
| 40 | High-Rise Apartment (7+ stories) | Multi-Family | 16% | 22% |
| 41 | Cabin / Cottage | SFR | 14% | 22% |
| 42 | Industrial Facility | Industrial | 15% | 28% |
| 43 | Warehouse / Distribution Center | Industrial | 15% | 28% |
| 44 | Flex Office / Warehouse | Office | 15% | 28% |
| 45 | High-Rise Office (13+ stories) | Office | 12% | 22% |
Across all 45 asset classes, the median baseline accelerated allocation was 24.0%. The interquartile range spanned 22.0% to 28.0%.
Variance and Edge Cases
What Drives Higher Allocations
Several structural factors consistently correlate with above-average accelerated allocations:
Site-intensive properties. Properties with large paved surfaces, extensive landscaping, or specialized outdoor infrastructure (fuel stations, car washes, RV parks, drive-up self-storage) allocate significantly more to 15-year property. Site improvements are classified as 15-year MACRS property under IRC §168(e)(3)(E) and are eligible for bonus depreciation.
Equipment-intensive interiors. Properties with specialized equipment (restaurants, medical offices, car washes) allocate more to 5-year property. Commercial kitchen equipment, medical gas systems, and wash tunnel machinery are classified as personal property under MACRS.
Condominium ownership structure. Condo units (residential, office, medical, retail) consistently show 0% allocation to 15-year property because the unit owner has no basis in site improvements. However, the absence of land and site basis concentrates the depreciable basis in interior components, producing elevated 5-year allocations (28%–33% at baseline vs. 14%–18% for comparable non-condo properties).
Amenity density. Properties with pools, clubhouses, fitness centers, restaurants, and structured parking allocate more to both 5-year and 15-year schedules. Apartment complexes with amenities allocated 30% at baseline vs. 24% for basic apartments.
What Drives Lower Allocations
Structural dominance. High-rise buildings (both residential and office) allocate less to accelerated property because structural systems — reinforced concrete, structural steel, elevator shafts, and curtain walls — constitute a larger share of total cost. These components are classified as real property under MACRS.
Minimal interior finish. Warehouses, industrial facilities, and flex space have open-plan, minimally finished interiors with limited separable personal property. The 5-year allocation for these asset classes was 5% — the lowest in the dataset.
Simple construction. Cabins, cottages, and ADUs use simpler construction methods with fewer specialty systems. This limits the number of components that can be reclassified to shorter recovery periods. That said, ADUs still present meaningful tax opportunities when paired with the right strategy — see our ADU cost segregation tax strategy guide for the full analysis.
The Baseline-to-Upper-Range Gap
The gap between baseline and upper-range total accelerated allocation averaged 12.2 percentage points across all 45 asset classes. This gap was narrowest for simple residential properties (8–10 points) and widest for self-storage and hospitality properties (14–20 points).
The gap reflects the sensitivity of cost segregation results to:
- Property age and renovation history
- Level of amenity and interior finish
- Methodology (engineering-based site visits vs. desk studies)
- Granularity of cost documentation available at time of study
First-Year Tax Savings by Property Value
The most practical question investors ask is: "What will I actually save?" The following tables apply the observed allocation benchmarks to specific property values at common purchase prices. All figures assume 20% land allocation, 100% bonus depreciation on accelerated property, and a 37% combined federal marginal tax rate.
Single-Family Residential (24% baseline accelerated)
| Purchase Price | Depreciable Basis | Accelerated Basis (24%) | Bonus Depreciation | Remaining Straight-Line (Yr 1) | Total Yr-1 Depreciation | Tax Savings at 37% |
|---|---|---|---|---|---|---|
| $400,000 | $320,000 | $76,800 | $76,800 | $8,844 | $85,644 | $31,688 |
| $600,000 | $480,000 | $115,200 | $115,200 | $13,265 | $128,465 | $47,532 |
| $750,000 | $600,000 | $144,000 | $144,000 | $16,582 | $160,582 | $59,415 |
| $1,000,000 | $800,000 | $192,000 | $192,000 | $22,109 | $214,109 | $79,220 |
| $1,500,000 | $1,200,000 | $288,000 | $288,000 | $33,164 | $321,164 | $118,831 |
A standalone single-family rental purchased for $750,000 would typically generate approximately $59,415 in first-year federal tax savings through cost segregation with 100% bonus depreciation, based on the observed 24% baseline accelerated allocation for this asset class.
Quick Estimate: Want to see what cost segregation could save on your specific property? Try Modern CFO's free cost segregation calculator — instant results in 60 seconds, no email required.
Multi-Family & Commercial (24%–28% baseline accelerated)
| Purchase Price | Depreciable Basis | Accelerated Basis (26%) | Bonus Depreciation | Remaining Straight-Line (Yr 1) | Total Yr-1 Depreciation | Tax Savings at 37% |
|---|---|---|---|---|---|---|
| $1,000,000 | $800,000 | $208,000 | $208,000 | $15,179 | $223,179 | $82,576 |
| $2,000,000 | $1,600,000 | $416,000 | $416,000 | $30,359 | $446,359 | $165,153 |
| $3,000,000 | $2,400,000 | $624,000 | $624,000 | $45,538 | $669,538 | $247,729 |
| $5,000,000 | $4,000,000 | $1,040,000 | $1,040,000 | $75,897 | $1,115,897 | $412,882 |
| $10,000,000 | $8,000,000 | $2,080,000 | $2,080,000 | $151,795 | $2,231,795 | $825,764 |
A $3 million apartment complex would typically generate approximately $247,729 in first-year federal tax savings at the 26% median accelerated allocation for multi-family and commercial properties.
Specialty Properties (40%+ baseline accelerated)
| Property Type | Purchase Price | Depreciable Basis | Accelerated % | Bonus Depreciation | Tax Savings at 37% |
|---|---|---|---|---|---|
| Full-Service Restaurant | $1,500,000 | $1,200,000 | 28% | $336,000 | $124,320 |
| Hotel (Full Service) | $5,000,000 | $4,000,000 | 26% | $1,040,000 | $384,800 |
| Car Wash | $2,000,000 | $1,600,000 | 90% | $1,440,000 | $532,800 |
| Gas Station (with C-Store) | $1,500,000 | $1,200,000 | 80% | $960,000 | $355,200 |
| Auto Dealership | $8,000,000 | $6,400,000 | 28% | $1,792,000 | $663,040 |
IRS Defensibility: Where the Safe Zone Ends
The IRS Cost Segregation Audit Techniques Guide (ATG) is the primary reference IRS examiners use to evaluate cost segregation studies. While the ATG does not specify exact allocation percentages, it does establish criteria that directly affect what allocations are defensible under examination.
The Data-Defined Safe Zone
Based on 8,000+ studies, the following allocation ranges represent the empirically observed boundaries for standard property types (excluding specialty assets like gas stations and car washes):
| Metric | Observed Range | Interpretation |
|---|---|---|
| Baseline accelerated (standard properties) | 14%–30% | The defensible range for typical residential and commercial properties |
| Upper-range accelerated (standard properties) | 22%–42% | Achievable with above-average amenities and detailed engineering |
| Interquartile range (middle 50%) | 22%–28% | Where most well-executed studies on standard properties land |
| 90th percentile | 32% baseline, 49.6% upper | Only 1 in 10 asset classes reaches these levels |
According to Matthew Gigantelli: "If a study claims 40%+ accelerated allocation on a standard apartment building or office, that's outside the empirical bounds of what 8,000 studies support. That doesn't automatically mean it's wrong — but it means the burden of justification is on the provider to explain what specific property characteristics produced that result. The IRS examiner will be asking the same question."
A study that falls within the observed interquartile range (22%–28% for standard properties) is, by definition, consistent with the outcomes produced by thousands of engineering-based analyses. A study that significantly exceeds the 90th percentile on a standard property type carries elevated scrutiny risk — not because the IRS has a bright-line rule, but because the allocation is statistically unusual and will require correspondingly unusual documentation to support. For a detailed analysis of what triggers IRS review and how to stay defensible, see our cost segregation audit risk guide.
What the IRS ATG Examines
The IRS Cost Segregation Audit Techniques Guide instructs examiners to evaluate studies on the following criteria:
| ATG Factor | What It Means | How It Connects to This Data |
|---|---|---|
| Qualifications of the preparer | Was the study prepared by professionals with engineering or construction expertise? | Engineering-based studies consistently produce allocations within the observed ranges. Desktop studies without site inspection sometimes produce outlier allocations. |
| Component-level detail | Are individual assets identified with costs, descriptions, and MACRS classifications? | Studies with granular component detail tend to cluster in the 22%–28% interquartile range. Studies with broad, unsubstantiated categories tend to produce inflated allocations. |
| Cost estimation methodology | Are costs derived from actual construction documents, contractor invoices, or recognized cost estimation techniques (Marshall & Swift, RSMeans)? | Engineering-based studies that use recognized cost data produce defensible allocations. Studies that estimate costs without a documented methodology are more vulnerable to adjustment. |
| Proper legal analysis | Are MACRS classifications supported by IRC §168, Treasury Regulations, and relevant case law? | Each component must be classified based on its function and relationship to the building — not assumed from templates. |
| Consistency with property characteristics | Does the allocation match what an examiner would expect for the property type? | This dataset provides the empirical expectation. A standalone single-family home at 24% baseline is consistent with 8,000 studies. The same property at 45% is not. |
Engineering-Based vs. Desktop Studies
The gap between baseline and upper-range allocations (averaging 12.2 percentage points) is partially explained by methodology differences. Engineering-based studies — where a qualified professional inspects the property, photographs components, and applies recognized cost estimation methods — typically produce allocations within the baseline-to-upper range observed in this dataset.
Desktop studies that rely on templates, generic assumptions, or satellite imagery without on-site verification sometimes produce allocations that exceed the upper range. These studies may capture legitimate value, but they face elevated scrutiny under the IRS ATG because the examiner cannot verify the methodology against physical evidence.
Matthew Gigantelli on the methodology distinction: "The IRS doesn't care whether you used AI, an engineer, or a CPA — they care whether the result is supported by evidence. An engineering-based study produces a report with individual component photographs, cost estimates from recognized databases, and MACRS citations for every line item. That's what survives an audit. A study that produces a higher number but can't show the examiner how each component was identified and classified is the one that gets adjusted." For a closer look at what engineers actually do during a study, see our DIY cost segregation study guide.
Overline's cost segregation studies are engineering-based, using a methodology that combines site-specific analysis with a proprietary database built from 8,000+ completed studies. Each component is individually identified, classified under MACRS, and documented with cost estimates derived from recognized construction cost databases. The allocation benchmarks in this article are the same benchmarks used internally to validate study quality — ensuring that every study delivered falls within the empirically observed range for the property type.
Practical Interpretation
The benchmark data presented here provides a reference framework for evaluating cost segregation study results. Several observations emerge:
Most properties cluster in a narrow allocation band. Excluding specialty properties (gas stations, car washes), the baseline total accelerated allocation for 39 of 45 asset classes falls between 14% and 30%. A study that falls within this range is consistent with the outcomes of 8,000+ engineering-based analyses. A study that significantly exceeds 30% on a standard property warrants further scrutiny of the underlying methodology and component documentation.
15-year property is the primary differentiator between property types. The 5-year property allocation is relatively consistent across most categories (12%–18%), while 15-year property allocation varies dramatically — from 0% for condo units to 68% for fuel-only gas stations. The presence and extent of site improvements is the single largest driver of variation in total accelerated allocation.
The condo effect is significant and consistent. Across all four condo subtypes in the dataset (residential, office, medical, retail), 15-year property was 0% and 5-year property averaged 29.3% at baseline. This structural pattern is driven by ownership characteristics, not building construction, and applies universally to condominium ownership across property types.
Upper-range allocations are achievable but conditional. The gap between baseline and upper-range allocations represents the difference between a conservative study on a typical property and a detailed study on a property with above-average amenities and complete cost documentation. The upper range is not aspirational — it reflects documented outcomes on qualifying properties. Investors using the BRRRR method with cost segregation frequently reach upper-range allocations because renovation work disproportionately involves 5-year and 15-year components.
Industrial and warehouse properties have the lowest cost segregation potential. With 5-year property allocations of 5% and total accelerated allocations of 15% at baseline, warehouses and industrial facilities represent the asset classes where the absolute dollar benefit of cost segregation is most sensitive to property size. The strategy remains viable, but the minimum property value threshold for positive ROI is higher than for other categories.
Methodology Notes
This dataset was compiled by Matthew Gigantelli, a cost segregation engineer with four-plus years of experience completing engineered studies on properties ranging from single-family homes to $100M+ commercial and industrial facilities. Gigantelli personally toured hundreds of properties and developed the asset classification taxonomy used in this analysis.
- All allocation percentages are expressed as shares of depreciable basis (purchase price minus land value).
- Recovery periods follow MACRS classification under IRC §168 as interpreted by the IRS Cost Segregation Audit Techniques Guide.
- 5-year property includes personal property classified under IRC §168(e)(3)(B) and asset classes 00.11, 00.12, and 57.0 per Rev. Proc. 87-56.
- 15-year property includes land improvements classified under IRC §168(e)(3)(E) and asset class 00.3 per Rev. Proc. 87-56.
- 7-year property (asset class 00.11) is included in the 5-year category for simplicity, as it represents a minor share of total allocations in most studies and is eligible for the same bonus depreciation treatment.
- Real property includes all components classified under IRC §168(c) with a 27.5-year (residential) or 39-year (nonresidential) recovery period.
- Baseline and upper-range tiers represent conservative and optimistic allocations, respectively, as observed across the study population. They do not represent minimum and maximum values for individual properties.
According to Gigantelli: "Every number in this dataset comes from real, completed studies — not theoretical models. The allocation bands were built by analyzing actual engineering reports, not by averaging industry assumptions. That's what makes this dataset different from the rule-of-thumb percentages you see quoted elsewhere."
Q: What does "depreciable basis" mean in the context of these benchmarks?
A: Depreciable basis is the purchase price of a property minus the value attributed to land. Land is not depreciable. For example, if a property is purchased for $1,000,000 and land accounts for 20% ($200,000), the depreciable basis is $800,000. All allocation percentages in this dataset are applied to the depreciable basis, not the total purchase price.
Q: Are these benchmarks applicable to properties of any size?
A: The allocation percentages are expressed as shares of depreciable basis and are generally scale-independent. A standalone single-family rental with $300,000 in depreciable basis and one with $1,500,000 in depreciable basis would typically show similar allocation percentages, though absolute dollar amounts differ proportionally.
Q: How does 100% bonus depreciation interact with these allocations?
A: Under the One Big Beautiful Bill Act (enacted July 4, 2025), 100% bonus depreciation applies to all MACRS property with a recovery period of 20 years or less, including the 5-year, 7-year, and 15-year property identified in cost segregation studies. This means the entire accelerated allocation percentage shown in these benchmarks can be deducted in the first year the property is placed in service.
Q: Why do gas stations show 0% real property allocation?
A: Fuel-only gas stations consist primarily of canopies (15-year property), underground storage tanks (5-year or 7-year property), pump islands (5-year property), and paved surfaces (15-year property). There is no enclosed building structure that would be classified as real property under MACRS. Gas stations with convenience stores include a building component, which is why they show 20% real property allocation at baseline.
Q: What explains the difference between baseline and upper-range allocations?
A: The baseline represents a conservative, defensible allocation for a typical property in each asset class. The upper range represents outcomes observed on properties with above-average amenities, newer construction, complete cost documentation, or more detailed engineering analysis. The difference is not a quality indicator — both tiers reflect documented study results. The applicable tier for a specific property depends on its physical characteristics and available documentation.
Q: What allocation percentage is considered IRS-defensible?
A: The IRS does not publish specific allocation thresholds. However, based on 8,000+ engineering-based studies, the empirically observed interquartile range for standard residential and commercial properties is 22%–28% total accelerated allocation at baseline. Studies within this range are, by definition, consistent with outcomes produced by thousands of qualified analyses. Studies that significantly exceed the 90th percentile (32% baseline) on standard property types face elevated scrutiny because the allocation is statistically unusual and requires correspondingly detailed documentation to support. The IRS Cost Segregation Audit Techniques Guide instructs examiners to evaluate the qualifications of the preparer, component-level detail, cost estimation methodology, and consistency with property characteristics — all of which are addressed by engineering-based studies.
Q: How much does a cost segregation study cost, and what is the typical ROI?
A: Study costs vary widely by provider type and property complexity. Traditional engineering firms charge $5,000–$25,000 per study. AI-native engineering providers like Overline deliver IRS-compliant engineering-based studies starting at $1,440 for residential properties — roughly 50–70% below traditional pricing. Based on the savings data in this article, a $750,000 single-family rental generating approximately $59,415 in first-year tax savings represents a 33x–41x return on study cost depending on the provider. Even at traditional pricing, the ROI typically exceeds 10x for properties with $300,000+ in depreciable basis. For a comprehensive breakdown of what studies cost across every property type and provider type, see our cost segregation pricing benchmarks from 3,000+ engagements.
Q: Does the study methodology affect the allocation percentage?
A: Yes. Engineering-based studies that include on-site inspection, component photography, and recognized cost estimation methods (Marshall & Swift, RSMeans) consistently produce allocations within the observed baseline-to-upper range in this dataset. Desktop studies relying on templates or satellite imagery sometimes produce allocations outside these ranges — in both directions. Higher allocations from desktop studies may reflect legitimate value but carry elevated IRS scrutiny risk due to the absence of physical documentation. Lower allocations from desktop studies may undercount separable components that would be identified during a physical inspection. Overline uses an engineering-based methodology calibrated against the 8,000+ study database presented in this article, ensuring each study falls within the empirically validated range for its property type.
Q: Is my cost segregation study too aggressive?
A: A cost segregation study is considered statistically unusual if the total accelerated allocation exceeds the 90th percentile for the property type. Based on 8,000+ studies, the 90th percentile for standard residential and commercial properties is approximately 32% total accelerated allocation at baseline. For a standalone single-family home, an allocation above 30% should be accompanied by documented justification (above-average amenities, extensive site improvements, or detailed cost records). For a standard office or apartment building, an allocation above 28%–30% at baseline is above the observed median and warrants review of the underlying methodology. An allocation above 40% on a standard property is outside the empirical bounds of this dataset and should raise questions about provider methodology.
Q: What is the typical cost segregation percentage for a rental property?
A: Based on 8,000+ studies, the typical cost segregation percentage for a rental property is 20%–28% of depreciable basis reclassified to accelerated recovery schedules (5-year and 15-year property). Specifically: standalone single-family homes average 24% (16% five-year, 8% fifteen-year), small multi-family (2–4 units) averages 24% (18% five-year, 6% fifteen-year), medium multi-family (5–20 units) averages 22% (16% five-year, 6% fifteen-year), and apartment complexes with amenities average 30% (18% five-year, 12% fifteen-year).
Q: Can I do cost segregation on a property I bought years ago?
A: Yes. A look-back cost segregation study (filed with IRS Form 3115, Application for Change in Accounting Method) allows property owners to claim all previously uncaptured accelerated depreciation in a single tax year — regardless of when the property was purchased. This is not an amended return; it is a change in accounting method that the IRS permits without prior approval for depreciation-related changes. The "catch-up" deduction applies the full cumulative difference between standard straight-line depreciation and accelerated depreciation for all prior years in the current tax year.
Q: How much does cost segregation save on a $500,000 property?
A: On a $500,000 property with 20% land allocation ($400,000 depreciable basis) and a 37% marginal tax rate: with 24% accelerated allocation (the residential baseline from 8,000+ studies), first-year bonus depreciation is $96,000. Adding straight-line depreciation on the remaining $304,000 ($11,055 for residential at 27.5 years), total first-year depreciation is approximately $107,055. At 37%, first-year tax savings are approximately $39,610. Without cost segregation, standard straight-line depreciation would be $14,545 ($400,000 / 27.5), producing tax savings of only $5,382 — a difference of over $34,000 in Year 1. For more savings examples across different property values and tax brackets, see how much does cost segregation save.
Q: What items qualify for 5-year depreciation in cost segregation?
A: 5-year property in cost segregation includes tangible personal property — items not permanently affixed to the building structure. The most commonly reclassified 5-year components, based on 8,000+ studies, include: flooring (carpet, vinyl, non-permanent tile), cabinetry and millwork, appliances, specialty electrical (dedicated circuits, decorative lighting), decorative plumbing fixtures, kitchen equipment (commercial ranges, walk-in coolers, hoods), security and fire alarm systems, window treatments, movable partitions, and data/telecom cabling. These items are classified under IRC §168(e)(3)(B) and asset classes 00.11, 00.12, and 57.0 per Rev. Proc. 87-56.
Q: What items qualify for 15-year depreciation in cost segregation?
A: 15-year property in cost segregation includes land improvements — structures attached to the land but separate from the building. The most commonly reclassified 15-year components include: parking lots and paved surfaces, landscaping (trees, shrubs, sod, irrigation systems), fencing and retaining walls, sidewalks and curbing, exterior lighting, drainage and stormwater systems, swimming pools and outdoor amenities, freestanding signage, and underground storage tanks. These items are classified under IRC §168(e)(3)(E) and asset class 00.3 per Rev. Proc. 87-56.
For deeper technical analysis on cost segregation strategies, see Modern CFO's benchmark analysis.
See Your Property's Tax Savings
Drop your address — the AI estimates your depreciation savings in 60 seconds, backed by a certified engineer study.
Free cost segregation estimate, engineer-certified studies, and ongoing depreciation tracking.
Backed by $1B+ in supported tax depreciation.
Continue Reading
- Cost Segregation Pricing Benchmarks — What studies actually cost across every property type and provider type
- Cost Segregation for Properties Under $500K — When the math works for smaller properties
- What a Real Cost Segregation Report Looks Like — Annotated engineer walkthrough of every report section
- Cost Segregation ROI After Bonus Depreciation Restoration — How 100% bonus changes the math
- The Real Cost of a Bad Cost Segregation Study — 5 horror stories from the field
- How to Read a Cost Segregation Study: CPA Guide — Filing guide for CPAs receiving studies from clients
Partner Resources from Modern CFO
- Cost Segregation Benchmarks: What 8,000+ Studies Reveal — Companion benchmark analysis
- Standard Depreciation vs Cost Segregation: $1B+ Data — The true difference quantified
- Cost Segregation Common Questions Answered — 25 most-asked questions by engineers
- Multi-Family vs Single-Family Cost Segregation — How benefits differ by property type