Cost Segregation overview
Engineering-Appraisal-Based | IRS-Defensible | Institutionally Aligned
Cost segregation is a capital recovery strategy that reclassifies qualifying components of real property into shorter tax recovery lives, accelerating depreciation and improving early-period cash flow.
But cost segregation is not merely a tax exercise.
With us, cost segregation is practiced as a discipline of valuation economics and engineering-based asset classification, designed for assets where capital intensity, system complexity, and regulatory scrutiny materially affect recoverability.
We do not approach cost segregation as a template-driven reclassification service.
We approach it as capital recovery under uncertainty.
Cost Segregation as a Capital Recovery Discipline
In capital-intensive assets, depreciation outcomes are not driven by square footage — they are driven by:
- How systems are engineered
- How capital is deployed
- How assets are economically consumed
- How infrastructure supports production, power, and operations
Cost segregation, when properly executed, aligns tax recovery with economic reality, not architectural form.
This is particularly critical for:
- Infrastructure assets
- Power-intensive facilities
- Industrial and production-driven properties
- Data centers and energy systems
- Specialized commercial real estate
Our Engineering + Appraisal-Based Approach
Unlike generic or software-driven studies, our engagements integrate:
Engineering-Based Asset Identification
We analyze how systems are designed, installed, and function within the asset, including:
- Electrical and mechanical systems
- Process and production infrastructure
- Structural supports tied to equipment and systems
- Utility, power, and control architectures
Assets are classified based on economic function, not visual appearance or generic categories.
Appraisal-Based Capital Allocation
We apply appraisal discipline to:
- Reconstruct total project basis
- Abstract non-depreciable land using market and residual methods
- Reconcile all allocations internally
- Prevent distortions caused by improper shell or land allocation
This ensures depreciation outcomes reflect capital reality, not aggressive modeling.
IRS-Defensible, Audit-Ready by Design
Our studies are structured to withstand:
- IRS examination
- CPA and auditor review
- Transactional due diligence
- Institutional governance standards
Every engagement emphasizes:
- Transparent asset classification logic
- Engineering support for functional assignments
- Full reconciliation to total project cost
- Conservative interpretation aligned with IRS guidance
- Documentation suitable for Form 3115 and related filings
Acceleration is pursued only when supported by function, documentation, and law.
Bonus Depreciation: Why Methodology Matters More Than Ever
Recent federal legislation restored 100% bonus depreciation for qualifying property placed in service on or after January 20, 2025.
This allows qualifying 5-, 7-, and 15-year property to be fully expensed in Year 1 — for both new and used assets.
However, bonus depreciation is only as valuable as the quality of the underlying asset classification.
Template-based or aggressive studies can:
- Misclassify long-life property
- Over-allocate to qualifying classes
- Create IRS exposure
- Undermine audit defensibility
Our methodology ensures bonus depreciation is:
- Applied conservatively
- Technically supported
- Institutionally defensible
Cost Segregation by Asset Class
Our cost segregation practice is structured around infrastructure and capital intensity, not generic property categories:
Industrial & Manufacturing
Process-driven facilities with high utility and equipment integration
👉 [Industrial Cost Segregation]
Data Centers
Power-dense, mission-critical infrastructure platforms
👉 [Data Center Cost Segregation]
Energy & Power Infrastructure
Nuclear, renewable energy, and power generation assets
👉 [Energy & Power Infrastructure Cost Segregation]
Commercial & Hospitality
Office, hotels, retail, mixed-use — executed with institutional discipline
👉 [Commercial & Hospitality Cost Segregation]
When Cost Segregation Is Most Valuable
- Upon placement in service
- At acquisition or recapitalization
- After expansion, retooling, or retrofit
- For multi-phase or campus-scale developments
- In connection with valuation, financing, or tax planning events
Bottom Line
Cost segregation, when properly executed, is not a tax strategy — it is a capital recovery discipline.
At US Valuation, cost segregation is:
- Engineering-informed
- Appraisal-disciplined
- IRS-defensible
- Designed for audit and institutional scrutiny
- Aligned with how infrastructure and commercial assets actually function
Begin with a Preliminary Review
We offer a no-fee preliminary feasibility discussion to assess whether a full study is appropriate and economically justified for your asset.
👉 Request a Preliminary Cost Segregation Review