Cost Segregation for New Construction

If you're building a new commercial property, residential rental, or multifamily project, the time to plan for cost segregation is before or during construction — not after. New construction cost segregation studies are more accurate, less expensive, and often yield higher reclassification percentages than studies on existing properties.

Why New Construction Is Ideal for Cost Segregation

When you build from the ground up, you have detailed construction documents, invoices, and contractor breakdowns that make it easy for the engineering team to identify reclassifiable components. This level of detail means:

• Higher accuracy: Direct cost allocation from construction documents instead of estimates
• Lower study cost: Less fieldwork required when documentation is thorough
• Maximum reclassification: Every component is captured from day one
• Immediate benefit: Accelerated depreciation starts in year one of the building's life

How the Process Works

1. Pre-construction planning: Engage the cost segregation team early so they can review blueprints and specifications
2. Construction documentation: Organize invoices and contracts by component category as the build progresses
3. Engineering analysis: The study team classifies every building component into the correct depreciation category
4. Tax filing: The study results are incorporated into your first-year tax return

What Gets Reclassified?

In a typical new construction project, 20% to 45% of the total construction cost can be reclassified from the default 27.5-year or 39-year schedule into shorter-lived categories:

• 5-year property: Carpeting, appliances, cabinetry, specialty electrical, window treatments
• 7-year property: Furniture, fixtures, and certain decorative elements
• 15-year property: Parking lots, landscaping, sidewalks, fencing, exterior lighting, signage

Bonus Depreciation on New Construction

New construction placed in service qualifies for bonus depreciation on all reclassified assets. Combined with cost segregation, this means you can take substantial first-year deductions on the non-structural components of your building. The bonus depreciation rate phases down annually, so acting sooner captures more savings.

Applicable Property Types

Cost segregation studies on new construction work for every property type:

• Residential rental properties
• Apartment buildings
• Commercial buildings
• Hotels and hospitality

Get Started Early

At Crane Financial, we recommend engaging our team during the planning or early construction phase. We'll coordinate the cost segregation study alongside your broader tax strategy to ensure every dollar of depreciation is captured from the start.