A cost segregation study is a useful tool. It is also widely misunderstood — by owners who think it creates deduction, and by sellers who pretend it has no exit cost. Here is the honest math.
A cost segregation study does not create deductions. It accelerates them. The total depreciation an asset will produce over its life is fixed by basis. A study reclassifies portions of that basis from 27.5- or 39-year property into 5-, 7-, or 15-year buckets, which then become eligible for §168(k) bonus depreciation. The owner takes more deduction now, in exchange for less deduction later — and a larger §1245 recapture obligation at exit.
A study is an engineering analysis. It walks the property, classifies components by IRS asset class, and produces a schedule reallocating basis. Land remains land. Land improvements (15-year) come out separately. Personal-property assets — appliances, carpet, dedicated electrical — come out as 5- or 7-year. The §1250 building shell is what’s left.
Done well, a study is defensible. Done as a marketing exercise, it is not. The IRS has issued guidance distinguishing the two1, and the difference at audit is enormous.
A study does not change total deduction. It does not eliminate §1245 recapture — in fact, it creates it, because every dollar reclassified to a 5- or 7-year bucket and then bonused becomes ordinary-income recapture at exit, taxed at marginal rates rather than the 25% unrecaptured §1250 rate.
The dollar of bonus depreciation taken today is a dollar of ordinary-income recapture at sale. There is no scenario in which it disappears. STRVue · Recapture posture, M3
A study makes sense when (a) the time-value gain on accelerated deduction exceeds the marginal-vs-25% rate spread at exit, and (b) the deduction can actually be used in the year taken — meaning the qualification gates hold and there is enough non-passive income to absorb the loss. Both conditions matter. Either failing erodes the case.
A study is a timing tool. Treating it as a magnitude tool is how owners get hurt.
If you have a study, STRVue ingests its schedule and runs both projections side by side: with-study and without-study. Each is run to True Owner Return — the after-tax IRR — over your hold period. You see the time-value gain explicitly, the recapture cost explicitly, and the net.
If the math doesn’t justify the study for your situation, we say so. The product has no incentive to upsell you into one.