White Paper • Cost Segregation
Cost Segregation for Multifamily Owners
How accelerated depreciation supports cash flow, capital planning, and long-term strategy.
Cost segregation is one of the most consistently underutilized federal tax strategies available to multifamily property owners, particularly those who acquired, expanded, or substantially renovated assets in the last five years. This white paper breaks down the mechanics, the math, and the market realities that determine how much you’re leaving behind.
5, 7, or 15
Compressed Years to Depreciate
Compared to standard 27.5 year depreciation schedule
6 – 7
Figures of Cash Flow
Typical benefit range for qualifying properties
10 – 15
Year Retroactive Lookback Window
Studies can be completed on properties acquired or built in the last 10-15 years
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What's Inside
How Depreciation Normally Works for Apartments
Why straight-line depreciation over 27.5 years consistently understates the economic reality of multifamily assets, and which building components wear out faster than the IRS default assumes.
What Cost Segregation Actually Changes
How a study reclassifies interior finishes, appliances, HVAC, electrical, and site work into 5-, 7-, and 15-year property, and why this changes the timing of deductions without changing the total.
Typical Results for Apartment Properties
Why apartment projects commonly see 20–35% of depreciable basis reclassified to shorter lives, why new construction and recent renovations fall at the higher end, and what that means for first-year after-tax cash flow.
Hold Period Economics: Short, Medium, and Long
How the value of a study shifts across a 1–2 year flip, a 3–5 year recap cycle, and a 5+ year hold, and the specific thresholds where the strategy moves from a timing benefit to a clear capital planning tool.
Recapture, 1301 Exchanges, and Ownership Structure
Why recapture is a mechanism, not a penalty, and how pass-through structures, 1301 exchanges, and reinvestment strategy determine whether the deferred tax ever gets paid.
A Sample Study: 320-Unit Class A
A full walkthrough of a $90M apartment community, including cost segregation results, Year 1 depreciation outcome, and the resulting first-year federal tax reduction.
KE Andrews operates at the intersection of engineering-level asset analysis and tax strategy, not as generalists, but as nationwide practitioners who specialize in the asset classes and jurisdictions where it matters most. Our Cost Segregation practice is integrated with our ad valorem, sales and use tax, and credits and incentives work, which means we identify opportunities that a standalone cost segregation firm simply won’t see.