Apartment Cost Segregation Case Study

Study Overview

In this case study done for tax year 2026, the apartment complex had a total cost of $40,680,000, not including land. Through cost segregation analysis, the owner was able to reclassify 18% of the total costs to either 5 or 7 year property and 8% of the total costs to 15 year property.

This resulted in a Net Present Value After Tax Benefit of over $2,358,000. The additional depreciation in the first year of the study was approximately $10,316,500.

Qualified Property

Apartment complexes will have a large amount of land improvements that qualify for accelerated depreciation. Qualified land improvements will include, but are not limited to; certain excavation work, storm water systems, asphalt paving, concrete curbs and sidewalks, concrete dumpster pads, dumpster enclosures, gates, fencing, swimming pools, tennis courts, volleyball courts, basketball courts, other recreation areas, landscaping, irrigation and fountains. Interior items of apartment complexes include, but are not limited to; dedicated electrical and plumbing to resident and clubhouse kitchens, dedicated electrical and plumbing to clubhouse office/fitness equipment, dedicated plumbing and electrical to swimming pools/hot tubs, dedicated electrical and plumbing to laundry areas, decorative millwork, decorative lighting, telephone/data systems, video/sound systems, floor coverings and wall coverings.