$912K Reclassified on a Retail Shopping Center in Michigan
The owner's CPA referred this client to USTAGI. They bought a retail shopping center in Michigan on December 30, 2025 and placed it in service the same day, which made 2025 the first tax year for depreciation. The $4.15M price included $1.25M of land, leaving a depreciable basis of $2.9M.
- Purchase price
- $4.15M
- Depreciable basis
- $2.9M
- Reclassified
- $912K
- Share of basis
- 31%
The property and the result
After an on-site inspection by USTAGI, the study moved $454K into 5-year property and $457K into 15-year property, a total of $912K or 31% of the basis, against a 27.7% median for USTAGI's commercial studies.
Because the property was acquired after January 19, 2025, the reclassified property may qualify for 100% bonus depreciation, subject to applicable requirements. The building's remaining basis stays on its 39-year schedule.
How the purchase price was allocated
| Category | Amount | Share of price |
|---|---|---|
| Land (not depreciable) | $1.25M | 30% |
| 5-year property | $454K | 11% |
| 15-year property | $457K | 11% |
| Remaining 39-year building basis | $1.99M | 48% |
How it compares: this study reclassified 31% of the depreciable basis. Across 170 commercial studies USTAGI has completed, the median is 27.7%.
How the study was done
- Study type
- Detailed engineering study
- Inspection
- USTAGI on-site inspection with interior photos
- Cost data
- RSMeans construction cost data
- Timing
- Same-year study for the 2025 tax year
- Placed in service
- December 2025
- Depreciation before the study
- 39-year nonresidential
- Client
- New client referred by their CPA
What typically qualifies on a property like this
The study assigns each component of the building and site to its IRS recovery period. On a retail shopping center, these are the kinds of items that usually move off the 39-year schedule.
5-year property
- Tenant finishes and removable flooring
- Decorative lighting and millwork
- Interior signage and displays
- Dedicated electrical and plumbing for tenant equipment
- Security and data systems
15-year property
- Parking fields, paving and curbs
- Pylon and monument signs
- Site and parking lot lighting
- Landscaping and stormwater drainage
- Sidewalks and exterior walkways
What this means at tax time
The property was acquired in December 2025, after January 19, 2025. Under federal legislation enacted in July 2025, eligible property acquired after that date may qualify for 100% bonus depreciation, subject to applicable requirements. Where it applies, the $912K of reclassified property can be deducted in the 2025 tax year instead of over 5 and 15 years.
Even without bonus depreciation, 5- and 15-year property is depreciated far faster than the 39-year building schedule, so more of the deduction lands in the early years of ownership. The remaining $1.99M of basis stays on the 39-year schedule.
Studying the property in the year it is placed in service means the faster schedules start on the first return, with no catch-up filing needed.
Questions about this case study
Depreciation begins when the property is placed in service. This center was placed in service on December 30, 2025, so 2025 is its first depreciation year and the study was prepared for the 2025 return.
A CPA sees the tax return but does not usually engineer the building. A study gives the CPA a documented breakdown of the property by recovery period, which they can rely on when preparing the return.
Land improvements such as parking lots, curbs, sidewalks, site lighting, signs, landscaping and drainage. At this center they made up half of the reclassified amount.
Property with a recovery period of 20 years or less that was acquired after January 19, 2025 may qualify for 100% bonus depreciation, subject to applicable requirements. Your CPA confirms eligibility for each asset.
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Results shown are from a completed USTAGI cost segregation study and are not a guarantee of future results. The client is not named, the location is shown by state and amounts are rounded. “Reclassified” is the depreciable basis the study moved into 5, 7 and 15-year property; it is not a tax-savings figure. Outcomes depend on each property and each owner’s tax situation. Consult your tax advisor about your situation.