When to run a cost segregation study — and the one deadline that is absolute

The ideal moment

The year the property is placed in service. Everything is clean: one placed-in-service date, fresh records, no recomputation, and the reclassified basis is deductible immediately with 100% bonus. There is no method change to file and no catch-up to compute.

The very common moment

Years later, on a property that has been depreciating straight-line since purchase. This is a look-back, and it works. Every dollar of missed acceleration comes forward as a single section 481(a) catch-up on the current return via Form 3115, with no amended returns required.

Owners who bought in 2015 and never ran a study are frequently the best candidates precisely because a decade of missed deductions arrives at once.

Two moments people forget

Before a major capital replacement. If you are about to replace a roof, chiller or storefront, a study run first establishes what the old component cost — which is what enables a partial asset disposition election to write off its remaining basis. Run it after and you have lost the evidence.

On inheritance. Inherited property generally takes a stepped-up basis at date of death, resetting the schedule on a much larger number. That is an excellent moment for a study.

Filing deadlines

An automatic method change is filed with a timely-filed original return including extensions — 15 September or 15 October for most calendar-year filers depending on entity type. Practically, the study needs to be finished several weeks before that. Studies take four to six weeks. Work backwards.

The deadline that is absolute

You must still own the property. Once you sell, the depreciation schedule closes and the look-back opportunity closes with it. There is no retroactive study on a disposed asset.

This is the single most common way owners lose the benefit — they intend to get around to it, and the property sells first. If you have owned something for years and never run a study, and a sale is anywhere on the horizon, that is the conversation to have now rather than later.