Cost Segregation for Multi‑Amenity Buildings: Accelerating Deductions for Gyms, Dog Parks and Salons

Turn amenity buildouts into working capital: how developers and investors accelerate deductions on gyms, dog parks and salons

Pressed for cash during lease-up? Facing rising interest costs and tighter underwriting? You92re not alone. Modern multifamily and mixed-use projects spend heavily on amenity buildouts to win tenants. The good news: with a properly scoped cost segregation study you can convert those amenity dollars into accelerated depreciation, meaningful tax deferral and improved cash flow within the first few years of operation.

Bottom line up front (inverted pyramid)

• What it does: Cost segregation reclassifies portions of a commercial property92s cost to shorter depreciable lives (5, 7, 15 years) instead of 39 years, unlocking front-loaded deductions.
• Why amenities matter: Gyms, indoor dog parks, salons and similar amenity buildouts include tangible components (equipment, flooring, specialized plumbing/HVAC, turf, fencing) that commonly qualify for shorter lives.
• Cash impact: Accelerated depreciation reduces taxable income early, deferring tax and improving net operating cash flow during critical lease-up and growth periods.
• Timing: Order the study at placed-in-service or retrospectively via an accounting-method change (Form 3115) to capture missed depreciation.

Accelerating depreciation on amenity buildouts can free capital for operations or reinvestment without changing ownership or equity structure.

Why amenity buildouts are a perfect fit for cost segregation in 2026

Post-2020 trends have moved from "bare-bones" leasing to experiential amenities as a competitive differentiator. Through late 2025 and into 2026, developers report greater tenant willingness to pay for on-site lifestyle features: boutique gyms, pet-focused amenities (indoor dog parks, grooming salons), and service suites tailored to work-from-home populations. These amenity buildouts are rich in tangible, separable components that historically qualify for accelerated depreciation.

At the same time, the federal tax environment still makes accelerated depreciation a high-value strategy. The phasedown of bonus depreciation under IRC 78(k) (the statutory 100% bonus depreciation gave way to scheduled reductions after 2022) means timing matters: while bonus depreciation is smaller in 2026 than in earlier years, cost segregation remains valuable because it separates assets into shorter MACRS classes (5/7/15 years) that capture deductions faster even without full bonus expensing.

How cost segregation actually works for amenity buildouts

Cost segregation is an engineering-driven analysis that segregates the total construction or acquisition cost of a commercial property into categories with different depreciable lives under the Modified Accelerated Cost Recovery System (MACRS).

Common amenity components that often reclassify to shorter lives

• Gyms: Exercise equipment, rubber flooring and subflooring systems, specialized lighting, dedicated electrical panels, acoustic systems, and fitness studio millwork 92 often 5-year property or personal property.
• Indoor dog parks: Synthetic turf with drainage, specialty waste systems, drainage piping, agility equipment, fencing, sound attenuation and dedicated HVAC or exhaust systems 92 often 5-15 year or land-improvement classes. (See practical pet and enclosure considerations in resources like the Complete Cat Litter Guide for parallels on surface and waste handling.)
• Salons & pet grooming: Plumbing and drainage for wash stations, salon chairs and dryers, tile and waterproof flooring, specialized electrical, partitions and finish millwork 92 many items fall into 5- or 7-year categories. For design and operator-focused ideas, see practitioner self-care and service guides such as Cozy Self-Care.

When these elements are identified and documented in a study, a larger percentage of the amenity buildout cost is moved off the 39-year building schedule and onto accelerated schedules, creating earlier tax deductions.

Practical steps: ordering and integrating a cost segregation study

1. Scope the study at project start or at placed-in-service: For new builds or major renovations, order the study before or immediately after placed-in-service to maximize benefit and ease documentation.
2. Choose the right provider: Use an engineer-based firm with construction-cost estimating capability and tax professionals familiar with current IRS audit guidance. Expect deliverables to include a schedule of allocations, cost detail, photos, and methodology. Providers are increasingly combining field expertise with digital estimating tools similar to the debates outlined in AI vs proprietary tools for estimating.
3. Document everything: Collect construction contracts, subcontractor invoices, change orders, equipment invoices, as-built drawings and site photos. Amenity-specific invoices (e.g., turf supplier, fitness equipment vendor) are high-value inputs. Technology-assisted capture (3D scans, drone imagery and AI-assisted cost allocation) is becoming common; teams should pair those workflows with robust data and pipeline practices to preserve defensibility.
4. Coordinate with your CPA/tax counsel: The study is an engineering product, but you must integrate findings into tax returns and, where appropriate, file Form 3115 for a change in accounting method to claim missed deductions retroactively.

When you can do a retrospective study

If you did not do a study at placed-in-service, a look-back study is often still profitable. The typical path is to prepare a cost segregation study and work with your CPA to file a Section 481(a) adjustment via Form 3115 to catch up the cumulative missed depreciation. That adjustment can create an immediate deduction in the year of filing, improving cash flow in a single tax year. Property operators who use modern property platforms (see reviews of property management tools) often find the look-back workflow easier because the data is centrally stored.

Case study (hypothetical) 92 see the numbers

Assume a mixed-use commercial property with a $1,000,000 amenity buildout (gym + dog park + salon). Under a straight 39-year allocation, annual depreciation on the buildout equals about $25,641/year. With a cost segregation study that reclassifies 60% of the amenity costs into 5- and 15-year classes, accelerated depreciation in the first five years may look like this:

• Year 1-3: Much higher deductions as 5-year property is front-loaded under MACRS.
• Estimated cumulative first 5-year depreciation: Often 40-60% of the amenity cost vs. roughly 12% under 39-year straight-line.

That means a tax basis reduction now and tax deferral that keeps cash in the project during lease-up. For a property in a 25% combined federal/state bracket, moving $400,000 of deductions into the first five years saves roughly $100,000 in taxes then, which can be redeployed into marketing, capex reserves, or early debt reduction. Institutional investors evaluating returns sometimes consider non-traditional financing and asset strategies such as tokenized real-world assets as part of portfolio diversification.

Advanced strategies and recent 2025-2026 developments

Several trends and technical nuances matter for 2026 tax planning:

• Bonus depreciation phase-down: The statutory bonus depreciation percentage has been stepped down since 2023. While bonus depreciation is smaller in 2026 than earlier years, segregating assets into shorter MACRS classes still accelerates deductions relative to a 39-year schedule.
• Qualified Improvement Property (QIP): QIP remains a valuable 15-year category for certain interior non-structural improvements. Many amenity interior costs may qualify as QIP, making them eligible for accelerated treatment where applicable.
• Increased audit focus: IRS enforcement funding increases through the mid-2020s have led to more scrutiny on large depreciation deductions. High-quality, engineer-backed studies and robust documentation are the best defense.
• Technology-assisted studies: Through late 2025, providers increasingly used 3D scans, drone imagery and AI-assisted cost allocation to speed studies and improve repeatability. These tools can lower study turnaround time and enhance accuracy for amenity-heavy builds; teams should align capture workflows with practical field kits and camera equipment guidance like community camera kit reviews and portable lighting/phone kits coverage.

Component disposition and replacements

When individual amenity components are replaced (e.g., new turf in a dog park), consider the tax benefit of a partial asset disposition. Properly documented dispositions allow removal of the remaining basis of the replaced item, creating additional current-year deductions. Work with tax counsel to apply guidance correctly; detailed field and documentation practices (including portable capture kits and clear change orders) materially improve disposition defensibility (see practical field kit reviews like Field Toolkit Review: Pop-Ups for analogies on documenting modular assets).

Risk management: audits, documentation and reasonable methodology

Cost segregation can be contested, especially for subjective allocations. Mitigate risk by:

• Using engineer-prepared studies that show methodology and cost-estimating logic.
• Maintaining a project folder with invoices, vendor contracts, change orders and photo documentation for each amenity component.
• Having tax counsel review the study and represent you in case of IRS inquiry.

IRS guidance to reference

Study providers and tax advisors commonly align analyses with the IRS Cost Segregation Audit Techniques Guide and current MACRS classifications. Aligning your study to these references improves defensibility during examinations.

When cost segregation may not make sense

Cost segregation is powerful, but not always right for every project. Consider these constraints:

• Short ownership horizon: If you plan to sell within a couple of years, the buyer92 may require purchase-price allocation adjustments and depreciation recapture may offset some benefits.
• Low taxable income: If the entity consistently generates losses or has NOLs that absorb accelerated deductions, immediate tax savings may be limited. However, deferral still improves long-term NPV in many cases.
• High audit risk with poor documentation: An inexpensive, low-quality study can increase risk without delivering value. Invest in quality.

Selecting a provider: evaluation checklist

• Engineer-led team with construction and tax expertise.
• Deliverables include a detailed report, cost worksheets, site photos and a usable allocation schedule for tax returns.
• References from similar amenity-heavy projects.
• Clear pricing model (flat fee vs percentage of savings) and an ROI illustration.
• Audit support or representation options.

Implementation checklist for developers and investors

1. Identify amenity elements and segregate invoices during construction closeout.
2. Order a cost segregation study before or at placed-in-service.
3. Coordinate study timing with your CPA; plan for Form 3115 if doing a look-back.
4. Capture QIP classification where appropriate for interior amenity costs.
5. Maintain a single folder for each amenity with vendor quotes, invoices, and photos.
6. Model the cash-flow impact and breakeven period; present to lenders and partners.

Measuring ROI and cash-flow impact

Key metrics to track:

• Net tax savings in year 1-5: The extra tax deferred (dollars) from accelerated depreciation.
• Payback period: Study fee divided by annual tax savings.
• NPV uplift: Present value of tax deferral cash flows compared to baseline.

Developers frequently see payback periods under two years for high-amenity projects. Institutional investors emphasize NPV improvements during underwriting, which can materially raise project returns when captured early.

Final practical tips (do these today)

• At construction closeout, flag all amenity-related invoices and send them to your CPA.
• If you did not run a study at placed-in-service, schedule a look-back study and discuss Form 3115 with your tax advisor.
• Budget for a quality study 92 it92s inexpensive compared to the tax dollars it can unlock.
• Discuss recapture risk and hold-sale timing with your advisor to align tax strategy and exit plans.

Summary

Cost segregation remains one of the highest-leverage tax-planning tools for commercial property owners in 2026. Amenity buildouts 92 gyms, indoor dog parks, salons and similar investments 92 contain many components that qualify for accelerated depreciation. A well-executed study improves near-term cash flow, provides tax deferral, and enhances investment returns when combined with careful documentation and tax integration.

Next step: Consult your CPA and tax counsel to scope a cost segregation study for your next amenity buildout. If you already have a property with recent amenity investments, ask about a look-back study and Form 3115 catch-up that can convert past missed deductions into immediate cash benefits.

Need help now?

Our team specializes in cost segregation for amenity-heavy commercial properties. We help developers and investors model cash-flow impact, coordinate engineer-driven studies, and implement the accounting-method changes necessary to capture missed depreciation. Contact us to discuss an actionable plan tailored to your project.

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