Commercial · 39-year property
Cost Segregation for Manufacturing Facilities
In a plant, the hard question is where the building stops and the process begins. That line is where the deduction lives, and it is drawn with engineering, not accounting judgment.
Process versus building systems
Electrical service feeding production equipment, bus duct, motor control centers, compressed air and process piping, dedicated exhaust and dust collection, equipment foundations and housekeeping pads, cranes and monorails, and process cooling all support the manufacturing operation rather than the building. Documented properly, these are 5 or 7-year property. Documented poorly, they get swept into a 39-year building and stay there for decades.
Section 168(n) qualified production property
The 2025 legislation added a new 100% deduction for qualified production property — certain nonresidential real property used in domestic manufacturing, production or refining — for property placed in service after July 4, 2025 and before 2031, with interim guidance issued in Notice 2026-16. That provision reaches parts of the building itself, which historically was the one thing cost segregation could not accelerate. If you are building or expanding a plant, the two analyses should be run together.
Component takeoff
What we pull out of manufacturing facilities
Grouped by the recovery period each component lands on. This is representative, not exhaustive — the takeoff on your building will be longer.
- 5Process electrical, bus duct, motor control centers and drops
- 5Compressed air, process piping, gas and vacuum distribution
- 5Dust collection, fume exhaust and process ventilation
- 5Equipment foundations, housekeeping pads and isolation systems
- 5Bridge cranes, monorails and hoists
- 5Process cooling, chilled water and heat rejection serving equipment
- 5Task lighting and equipment-specific controls
- 5Office and lab finishes, casework and data cabling
- 7Production machinery and tooling
- 7Laboratory and quality-control equipment
- 7Office and plant furniture
- 15Truck courts, employee parking, drives and aprons
- 15Fencing, gates, guardhouses and security bollards
- 15Yard lighting, site electrical and transformer pads
- 15Storm systems, retention, spill containment and site drainage
- 15Landscaping, irrigation and screening
- 15Rail spur improvements where owned
- 39Building shell, structural frame, roof and slab
- 39General plant HVAC and base electrical service
- 39Fire protection mains and restrooms
- 39Portions potentially eligible under Section 168(n) — analyzed separately
Questions
How much of the basis usually reclassifies on this property type?
Studies on manufacturing facilities typically move 22% to 40% of depreciable basis into 5, 7 and 15-year classes. That is a planning range from comparable buildings, not a promise — the number that ends up on your return comes from the actual takeoff.
What documents do you need?
The closing statement, the current depreciation schedule and the property address at minimum. Construction records, drawings, pay applications and change orders make the work more precise and often cheaper.
I bought this several years ago. Is it too late?
No. As long as you still own it and placed it in service after 1986, a look-back study captures every missed deduction and brings it forward on the current return via Form 3115. No amended returns.
Related
Other property types
The study is one piece. We can handle the rest of the return.
Deprecio is part of the Shurek Accounting & Tax family of brands. If you want the study and the tax work under one roof — the return, the Form 3115, entity structure, quarterly estimates, multi-state filings — that is a single engagement, not a hand-off between two firms.
No-cost feasibility review
Find out what your building is hiding.
A feasibility review is free and takes about twenty minutes. Bring the closing statement and the depreciation schedule; we will tell you plainly whether a study pays for itself.