Cost Segregation Study

Apartment properties are among the most depreciation-efficient real estate asset classes — second only to hotel and lodging properties in many portfolios.

But this benefit is not automatic.

Apartment cost segregation is executed as a discipline of valuation economics and engineering-based asset classification, not as a percentage-based tax product.

Our work is designed for owners and investors who require:

• Defensible capital recovery
• Audit-ready documentation
• Consistent treatment across portfolios
• Premium-grade institutional credibility
   

Unlike many commercial assets, apartment properties exhibit a uniquely favorable combination of:

• High unit-level asset concentration
• Repetitive short-life components
• Dense mechanical and electrical distribution
• Extensive site improvements
• Amenity and common-area system intensity
   

These characteristics create a structurally higher proportion of qualifying 5-, 7-, and 15-year property — when properly identified and documented.

This is why apartments consistently outperform most property types in cost segregation yield.

Apartment properties typically contain substantial qualifying assets across multiple layers:

• In-unit electrical and plumbing distribution
• Appliances and dedicated circuits
• Floor coverings and wall finishes
• Built-in cabinetry and millwork
• HVAC distribution and controls
   

• Central mechanical systems
• Fire protection and life safety systems
• Domestic water and waste systems
• Low-voltage and communication systems
   

• Parking lots and garages
• Walkways, lighting, and landscaping
• Recreational and amenity improvements
• Retaining walls, fencing, and drainage
   

When properly classified using engineering and appraisal discipline, these systems generate material acceleration of depreciation without compromising IRS defensibility.

Generic or template-driven apartment studies often fail in two critical areas:

1. Over-allocation to short-life property, creating audit risk
2. Improper land and shell abstraction, distorting total basis
    

Our methodology integrates:

We analyze how apartment systems are designed, installed, and function — not merely how they appear on plans.

This includes:

• Functional separation of building shell vs. unit-level systems
• Proper classification of mixed-use systems
• Treatment of structural vs. tenant-serving components
   

We apply valuation discipline to:

• Abstract non-depreciable land
• Separate site improvements correctly
• Reconcile all allocations to total project basis
• Prevent distortion from improper shell assignment
   

This ensures depreciation outcomes reflect economic reality, not aggressive modeling.

Apartment cost segregation must be particularly disciplined because:

• Apartments are frequently audited asset classes
• Portfolio and syndication structures demand consistency
• Misclassification risks compound across properties
   

Our documentation emphasizes:

• Transparent asset classification logic
• Engineering support for functional assignments
• Full reconciliation to total project cost
• Conservative interpretation aligned with IRS guidance
• Audit-ready support for Forms 3115 and related filings
   

With the restoration of 100% bonus depreciation for qualifying property placed in service on or after January 20, 2025, apartments represent one of the most tax-efficient asset classes for accelerated capital recovery.

However:
The magnitude of benefit depends entirely on the quality of classification and documentation.

Poorly executed studies can:

• Misclassify long-life property
• Inflate qualifying allocations
• Create IRS exposure
• Undermine financing and audit credibility
   

Our methodology ensures bonus depreciation is:

• Applied conservatively
• Technically supported
• Institutionally defensible
   

• Upon acquisition
• Upon placement in service
• After major renovations or repositioning
• For value-add or stabilized portfolios
• In connection with refinancing or recapitalization
• For multi-property portfolio standardization
   

Apartment cost segregation is one of the highest-yield depreciation strategies in real estate — but only when executed with engineering rigor and appraisal discipline.

At US Valuation, apartment cost segregation is:

• Valuation-economics driven
• Engineering-informed
• IRS-defensible
• Portfolio-consistent
• Suitable for institutional scrutiny
   

If you own or operate apartment assets and are evaluating accelerated depreciation, the opportunity may be material — but only if pursued with defensible methodology and capital discipline.

👉 Request a Preliminary Cost Segregation Review