US Cost Segregation Calculator with Bonus Depreciation

Cost segregation: accelerated depreciation and bonus depreciation

A cost segregation study reclassifies part of a US building into 5-year and 15-year property, eligible for bonus depreciation, instead of 27.5 or 39 years. With the default values ($2.5M, 20% land, 100% bonus), the first-year deduction rises from $51,282 to $538,462. Since the One Big Beautiful Bill Act of 4 July 2025, bonus depreciation is 100% for property acquired after 19 January 2025.

How it is calculated

Depreciable basis = price × (1 − land share). Without a study, the tool depreciates it straight-line over 39 years (commercial) or 27.5 years (residential rental). With a study, it carves out a percentage of 5-year personal property and a percentage of 15-year land improvements. On these two blocks, year 1 adds the bonus at the chosen rate and, on the remainder, the first-year MACRS rate under the half-year convention: 20% for 5-year and 5% for 15-year property. The rest of the structure stays straight-line. Tax saving = deduction × the marginal rate you enter.

Default example

A $2,500,000 commercial building with 20% land gives a $2,000,000 basis. Straight-line over 39 years, that is $51,282 a year, or $18,974 of tax at 37%. With 15% 5-year property ($300,000), 10% 15-year property ($200,000) and the default 100% bonus (property acquired after 19 January 2025): 300,000 + 200,000 + 38,462 = $538,462 deducted in year 1, i.e. $199,231 of tax and $180,256 of extra cash; the 10-year NPV at 7% is $139,580. With a 60% bonus (old phase-down), the deduction falls to $366,462 (180,000 + 120,000 + 24,000 + 4,000 + 38,462) and the NPV to $80,104.

Limits of the tool

• The 40% option covers property acquired before 20 January 2025 and placed in service in 2025, or the election for the first tax year ending after 19 January 2025; the 80, 60 and 20% options follow the old phase-down (2023, 2024 and 2026), which only covers property acquired before 20 January 2025.
• The structure gets a full year of depreciation in year 1, without the IRS mid-month convention.
• With bonus below 100%, the NPV for years 2 to 10 omits the remaining depreciation of the 5- and 15-year blocks, which understates the gain.
• The cost of the study and depreciation recapture on sale are not modelled.

This is a US federal tax rule. The result is an estimate and does not replace an engineering study or advice from a CPA.

Sources and dates: 27.5-year (residential rental) and 39-year (nonresidential) recovery periods from IRS Publication 946, 2025 edition; 100% bonus depreciation made permanent by P.L. 119-21 of 4 July 2025 for property acquired after 19 January 2025, with an election for 40% in the first tax year ending after that date; 40% for property acquired before 20 January 2025 and placed in service in 2025 (Publication 946; IRS Notice 2026-11, announced 14 January 2026) (checked on 14/10/2026).

Frequently Asked Questions

What is a cost segregation study?

It is an engineering study that splits the price of a US building between the structure (27.5 or 39 years), 5-year property (carpeting, equipment, dedicated wiring) and 15-year land improvements (parking lots, exterior lighting, fencing). The 5- and 15-year blocks qualify for bonus depreciation. In the tool, these shares range from 0 to 35% and from 0 to 25% of the basis.

What bonus depreciation rate applies in 2026?

Since P.L. 119-21 of 4 July 2025, bonus depreciation is 100% with no end date for property acquired after 19 January 2025. The phase-down rates now only cover property acquired before 20 January 2025 (40% if placed in service in 2025). This is the tool's default rate; the 40% option also covers the election of a reduced rate for the first tax year ending after 19 January 2025.

Can land be depreciated in the US?

No, the land share is excluded from the depreciable basis. The tool removes 20% by default: a $2,500,000 purchase gives a $2,000,000 basis. Each extra point of land removes $25,000 of basis.

Why is the NPV lower than the first-year gain?

Cost segregation brings deductions forward without increasing them: what is deducted in year 1 is no longer available later. Discounted over 10 years at 7%, the default gain (100% bonus) is worth $139,580, against $180,256 of extra cash in year 1. Below 100% bonus, the tool leaves out part of the depreciation for years 2 to 10, which tends to understate this NPV.

Is this tool really free?

Yes, all tools on Kristools are 100% free and accessible without registration.

Is my data protected?

Yes. All processing is performed directly and securely inside your browser. No personal data is sent to our servers.