Office cost segregation

Office buildings get smarter when you re-classify the shell.

A 39-year office shell looks straightforward — until you peel out the tenant improvements, dedicated electrical systems, decorative lighting, and partition walls. Engineering-based cost segregation typically shifts 15–25% of basis into 5- and 15-year property, fully bonus-depreciable under OBBBA.

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Commercial office

Office buildings carry more 15-year land improvements than people realize.

Parking lots, signage, exterior lighting, irrigation, landscaping, paving — on a typical office property, these add up to 8–15% of total basis, all eligible for 15-year MACRS treatment plus 100% OBBBA bonus depreciation.

Add 5-year personal property (carpet, wall coverings, dedicated electrical for IT loads, decorative lighting) and you’re typically looking at 22–30% of basis moving into accelerated buckets.

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Modern commercial office building interior

Office-specific allocationsIncluding tenant-improvement and QIP analysis for re-leased space.

What we reclassify in an office building

5-year personal property

Decorative lighting and millwork
Window treatments and removable wall coverings
Modular furniture systems
Tenant-specific dedicated power and data
Decorative interior finishes

15-year land improvements & QIP

Parking lots, walkways, lighting, signage
Landscaping and irrigation
Qualified Improvement Property (interior non-structural work)

Reclassification benchmark

Class A office with substantial tenant improvements often reclassifies 20–25%+. Class B/C with minimal TI work trends to the lower end of the 15–25% range.

Office pool	Typical %
39-year real property	75–85%
15-year land improvements / QIP	8–15%
5-year personal property	7–12%

Sample — $3M Class B office

~$540,000

First-year deduction with 20% reclassification on $2.7M depreciable basis under 100% bonus.

FAQ

Office cost segregation, answered

What percentage of an office building reclassifies?

Most office buildings reclassify 15–25% of depreciable basis. Class A office with significant tenant improvement allowances trends higher; bare-shell or owner-occupied space trends lower.

How does QIP factor in?

Qualified Improvement Property — interior, non-structural improvements made after a building is placed in service — has a 15-year MACRS life and is bonus-depreciation eligible. TI work and renovations routinely qualify and are captured in the study.

Should I do a study before or after build-out?

After. The property must be placed in service to depreciate. For acquisitions of existing buildings, the study is commissioned after closing. For new construction or major TI, after certificate of occupancy.

What if I'm an owner-occupier?

Owner-occupied office buildings absolutely qualify for cost segregation. The depreciation deduction reduces the operating company's taxable income (or your rental income if held in a separate entity).

Office buildings get smarter when you re-classify the shell.

Office buildings carry more 15-year land improvements than people realize.

What we reclassify in an office building

5-year personal property

15-year land improvements & QIP

Reclassification benchmark

Office cost segregation, answered

Free feasibility on your office property