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A restaurant cost segregation study sorts your build-out by tax life. The kitchen systems, dedicated utilities, finishes, and site work move off the 39-year schedule and onto 5, 7, and 15-year lives, so you recover that cost in years instead of decades.
That matters more now than a year ago. The One Big Beautiful Bill made 100% bonus depreciation permanent for property acquired and placed in service after January 19, 2025, per IRS guidance in Notice 2026-11, so most of what the study pulls out is deductible the year you place it in service.
Most reclassifiable costs for a restaurant involve:
Cooking equipment, walk-in coolers and freezers, exhaust hoods, grease traps, the fire-suppression system over the cook line, and the electrical and plumbing run specifically to them. These are equipment, not building, and sit on 5 and 7-year lives.
Decorative lighting, millwork, wall and floor finishes installed for appearance, signage, and point-of-sale wiring. Finishes there for the look of the room, not to hold the building up, generally carry a short life.
Parking, curbs, exterior lighting, fencing, and landscaping: land improvements, the classic 15-year property named in IRS Publication 946.
Examiners look at equipment-specific systems versus general building systems, such as:
A defensible study documents each call and ties it to the authority behind it. That documentation keeps the deduction from being adjusted back under a review under the cost segregation framework.
We work from your build-out costs, contractor invoices, and fixed-asset list, and an engineering-based estimate fills any gap. The restaurant gets walked the way an examiner would: cook line, prep, walk-ins, front of house, exterior.
Every asset goes on its correct life and is tied to the source that supports it, so the result is defensible.
Applied on the current return for a property you just placed in service, or through a change in accounting method for one you have held a while.
Dimov Tax does the study and the tax work in one place. The deduction gets modeled against your real picture before anything is filed: whether the loss is active or passive for you, and what recapture looks like if you sell. A standalone engineering report skips that step, so the deduction can sit idle.
Let’s look at a hypothetical example involving a $600,000 rebuild:
Every restaurant is different. This is an illustration, not a quote; your actual split is measured in the study.
People that own real estate… absolutely take a look at cost segregations. This can save tens of thousands of dollars, in some cases even hundreds of thousands of dollars.
They handled complex real estate tax optimizations... exceeded in their guidance but absolutely delivered with top notch service, quick responses and impeccable work.
A remodel usually leads to new deductions, on top of your original study:
every refresh or franchise-required update installs new short-life property to reclassify.
the fixtures and finishes you tear out can often be written off at retirement.
A restaurant that has renovated since its last study may be leaving both unclaimed.
The fee tracks the building: its size, its build-out cost, how detailed your records are, and whether the study is current-year or a look-back. We quote after a short look, so the fee fits the job, and it runs a fraction of the first-year deduction it frees up.
Cost seg works on a building you own and hold to make income. A personal asset does not qualify, and that gate is worth confirming first.
Pushing the dining room HVAC onto a 5-year life because the kitchen hood qualifies is the call that draws an adjustment, with interest and penalties.
The depreciation you accelerate comes back as ordinary-income recapture when you sell, the section 1245 recapture explained in IRS Publication 544. If a sale is near, that belongs in the math up front.
A big first-year deduction is worth less if the loss is passive and you have no passive income to absorb it. Real estate professional status and material participation decide whether it works now or waits.
An older restaurant can still claim the catch-up through a change in accounting method, deducted in the year of change as a section 481(a) adjustment, per the Form 3115 instructions. Age is not a bar, but each year you wait leaves another year of deductions unclaimed.
The year-one deduction is a federal benefit. Some states, including California, do not conform to bonus depreciation, so the state result can be smaller and spread over a longer schedule.
You do not need to know which parts qualify; that is our job. We take a short look, tell you whether there is enough to pursue, and tell you straight if there is not. A restaurant cost segregation study reaches only as far back as your records allow, so the deduction in your kitchen and dining room does not wait forever.
Send us the building, the build-out cost, and the date it went into service. We will tell you whether there is real deduction to pull forward.
