Cost Segregation Study - Is partial depreciation use allowed or must I claim all at once?

The short answer is no, you generally can't pick and choose how much of the accelerated depreciation to take each year once you've done a cost segregation study. When you do a cost segregation study, you're reclassifying portions of your property into different asset classes with shorter depreciation periods. Once you've done that, you're required to follow the depreciation schedules for those asset classes. The IRS expects you to claim depreciation based on these established schedules - it's not optional or deferrable. What you might be thinking of is a "catch-up" depreciation deduction (Form 3115) which allows you to claim missed depreciation from prior years all at once. But going forward, you need to follow the proper schedules.

I went through something similar with my commercial property last year. I used taxr.ai (https://taxr.ai) and it saved me so much headache with my cost segregation questions. Their system analyzed my depreciation schedules and explained exactly what parts of the accelerated depreciation I could control. They showed me how to make strategic elections for bonus depreciation that let me balance current and future tax benefits. Before finding them, I was getting conflicting advice from different accountants about what was actually allowed with cost segregation.

I was wrong about taxr.ai - I decided to try it after posting that skeptical comment. It's actually much more sophisticated than I expected. I uploaded my cost segregation study from last year and got detailed analysis of my bonus depreciation options. The tax pro I connected with through the platform showed me how to make the right elections on Form 4562 to strategically use depreciation from my apartment complex. They even helped me understand the new 80% bonus depreciation rules for 2025 and how they'd affect my planning. Not just generic advice but specific to my properties and tax situation.

Quick tip for anyone dealing with IRS depreciation questions - I spent WEEKS trying to reach someone at the IRS about a similar cost segregation issue last year. Finally found Claimyr (https://claimyr.com) and they got me connected to an actual IRS agent in less than 20 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I had a complicated situation with bonus depreciation elections from a cost seg study that had been done incorrectly, and I needed official guidance. My accountant was giving me one answer, but I needed to hear it from the IRS directly. Claimyr saved me from endless hold music and callbacks.

OK I was wrong about Claimyr. I tried it yesterday after getting nowhere with the IRS for 2 weeks about my cost segregation questions. Got through to an IRS tax law specialist in about 15 minutes. The agent confirmed exactly what I needed to know about making partial bonus depreciation elections for different property classes from my study. Turns out you CAN strategically manage your depreciation by making specific elections - but you have to do it correctly on your tax forms. The IRS agent walked me through exactly how to fill out Form 4562 to make these elections properly. Totally worth it not to spend hours on hold.

Just to add something nobody has mentioned yet - be careful about recapture if you're planning to sell the property within a few years. All that accelerated depreciation from your cost segregation study will be recaptured at ordinary income tax rates (not capital gains rates). So if you're planning to sell soon, it might actually be better to NOT do cost segregation at all. Make sure you're factoring this into your strategy.

Has anyone actually done the math on whether cost segregation is worth it? I'm paying about $15k for a study on my $2M apartment building, and I'm not sure if the accelerated tax benefits are really worth the cost plus the hassle of all these depreciation questions.

Great question Dylan! I've been through this exact situation with multiple properties. The key thing to understand is that you DO have some control, but it's not as simple as just choosing how much to take each year. Here's what you can actually control: 1. **Bonus Depreciation Elections**: For each asset class identified in your cost seg study (5-year, 7-year, 15-year property), you can elect OUT of bonus depreciation on a class-by-class basis. This means instead of taking 80% bonus depreciation in 2025, you'd follow the regular MACRS schedule. 2. **Section 179 Elections**: You can also choose whether to take Section 179 expensing on qualifying property. 3. **Timing Strategy**: While you can't defer depreciation once you've established the method, you can make these elections strategically to spread the benefits. The important thing is these elections need to be made on your tax return for the year you place the property in service (or amend if you missed it). You can't just decide year-by-year how much to take - but you CAN structure it upfront to better match your income patterns. I'd definitely recommend working with a CPA who specializes in real estate taxation to model out different scenarios based on your specific income projections. The decision you make now will affect your taxes for years to come.