Restaurant cost segregation

Restaurants are half short-life property by dollar value.

No commercial property type reclassifies harder than a restaurant. Hood systems, walk-in coolers, kitchen equipment, decorative finishes, bar millwork, and themed lighting all qualify for 5-year MACRS — and a tenant buildout is almost entirely QIP. TDA's restaurant studies routinely reclassify 30–50% of basis.

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Restaurants & bars

Restaurants are the textbook example of high-FF&E, high-MEP cost segregation.

Commercial kitchen equipment, walk-in coolers, bar equipment, decorative lighting, specialty plumbing and gas, kitchen ventilation, finish carpentry — restaurants concentrate 5-year personal property at levels few other property types match.

Typical reclassification: 28–42% of basis. Combined with OBBBA 100% bonus, the first-year deduction often exceeds 25% of the entire purchase price.

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Kitchen + bar + FF&ERestaurants regularly produce the highest deduction-per-dollar of any property type.

What we reclassify in a restaurant

5-year personal property

Kitchen equipment (ranges, fryers, ovens, walk-ins)
Hood systems and exhaust
Bar equipment and back-bar coolers
Decorative finishes — wood paneling, brick veneers, themed décor
Decorative lighting throughout
POS systems and dedicated electrical

15-year QIP (interior buildout)

Tenant improvement work after building placed in service
Decorative ceilings and partitions
Specialty plumbing for kitchens and bars

Reclassification benchmark

Restaurants reclassify 30–50% of basis. Quick-service and themed restaurants trend higher; bare-bones cafe spaces trend lower. Tenant-paid buildouts are often 80%+ shorter-life because the shell is the landlord's, not the tenant's.

Restaurant pool	Typical %
39-year real property	50–65%
15-year land improvements / QIP	15–25%
5-year personal property	20–35%

Sample — $1.5M restaurant buildout

~$1.05M

First-year deduction at 70% reclassification on a tenant-funded restaurant buildout under 100% bonus.

FAQ

Restaurant cost segregation, answered

Why do restaurants reclassify so heavily?

Restaurants are concentrated personal property: kitchen equipment, hoods, walk-ins, smallwares, decorative finishes, lighting, and bar fixtures are nearly all 5-year property. Combined with rich QIP from buildouts, restaurants typically reclassify 30–50% of cost basis.

What if I'm a tenant rather than the building owner?

Tenants who fund their own buildout depreciate those leasehold improvements as QIP (15-year, bonus-eligible). A cost segregation study on a tenant buildout typically delivers exceptional first-year deductions because the buildout cost is almost entirely short-life or QIP.

Does this work for breweries and distilleries?

Yes — and the reclassification is often higher because of dedicated process equipment, fermentation rooms, dedicated power and water, and tasting-room finishes. Breweries are among the highest-yielding cost-seg studies.