How a Cost Segregation Study Identifies Tangible Personal Property for Faster Write-Offs

Rick Ruberg
Sep 2
2 min read

Updated: Oct 6

Modern office space with glass walls, plants, desks, and ergonomic chairs. Neutral tones, beige carpet, and a corkboard on the right wall.

When it comes to getting the most out of your tax filings on real estate, savvy investors know that depreciation plays a crucial role. However, not every asset within an investment property holds the same value. That’s where a cost segregation study steps in... you reclassify certain parts of your property as Tangible Personal Property, enabling you to speed up your deductions and get cash back in your pocket more quickly.

Let’s see how this process works, why it’s important, and how classifying tangible personal property can help you enjoy faster write-offs.

What Is Tangible Personal Property?

Tangible Personal Property (TPP) is basically all the movable stuff in your building that isn’t fixed to the structure. Think of it as the items you can pick up and take with you (appliances, business equipment, furniture, etc.).

How a Cost Segregation Study Identifies TPP

A cost segregation study is an engineering-based analysis that dissects your property into its individual components. The goal? To separate real property (the building and land improvements) from tangible personal property that can be depreciated much faster.

Here’s how cost seg professionals do it:

Property Review – Engineers and tax experts review construction documents, blueprints, invoices, and site photos.
Asset Breakdown – Each component is classified according to IRS guidelines, what’s structural (real property) vs. what qualifies as tangible personal property.
Reallocation of Assets – Components originally lumped into the “building” category are reallocated into 5-, 7-, or 15-year property buckets.
Tax Report Delivery – You receive a detailed cost segregation report documenting reclassifications, giving your CPA the evidence needed for accelerated depreciation.

The Tax Impact of Reclassifying Tangible Personal Property

Here’s where it gets exciting. By identifying and reclassifying tangible personal property through a cost segregation study, you can:

Diagram showing three benefits: Bonus Depreciation, Larger Upfront Deductions, and Improved Cash Flow, linked by colored lines.

Take larger deductions upfront instead of spreading them thinly over decades.
Qualify for bonus depreciation (100% in 2025 under new legislation), which allows you to write off the entire cost of many TPP assets immediately.
Improve cash flow in the first years of ownership, giving you capital to reinvest into more properties or business growth.

Why Work With Cost Seg Experts?

The IRS has strict rules for what counts as tangible personal property. Misclassify items and you could face penalties in an audit. That’s why a professional, engineered cost segregation study is essential. It not only gets you more deductions but also provides documentation to support your positions.