Cost segregation for hotels
A full-service hotel is really two buildings stacked in one basis: a long-life box of guest floors, elevators, and central plant, and a churning layer of furniture, finishes, and public-space design that gets replaced on a brand-mandated cycle. The study's job is to separate them. Base-building HVAC risers, the structural frame, and the roof stay on 39-year depreciation; the per-room package and the lobby's decorative program are where the shorter-life value clusters. For full-service assets published estimates commonly sit in a 6–35% window, with the low end reflecting older interior-heavy properties whose FF&E has already been written off. That is a market range for the type, not a figure we have modeled — a hotel-specific component library is not something we have calibrated.
| Typical market range | 6–35% |
|---|---|
| Typical market fee | $10k–35k |
| Recovery periods captured | 5-, 7- and 15-year vs the 39-year shell |
| Top-ranked provider (our rubric) | Cost Seg Smart |
| Delivery | Engineering-based; virtual or on-site depending on the provider |
1What reclassifies in a hotel or motel
In a hotel or motel, cost segregation typically reclassifies 6–35% of depreciable basis out of the 39-year building shell into 5-, 7- and 15-year property. The components that recur:
| Component | Recovery period | Authority carried (with caveat) |
|---|---|---|
| Guest-room FF&E — case goods, seating, and soft goods where owned | 5-year | Personal property (Asset Class 57.0) when the operator owns the furnishings rather than leasing them. Multiplies by key count; verify against the FF&E ledger, since a management company may hold title to some items. |
| Decorative & millwork lobby / public-space finishes | 5-year | May qualify as §1245 property where the finish is decorative rather than part of the building's operation. Turns on whether the millwork, feature walls, and reception surfaces serve design vs. structural function — an engineer's line-by-line review, not a blanket call. |
| Commercial kitchen & laundry equipment | 5-year | Equipment serving the food-and-beverage and housekeeping operations, generally personal property; special plumbing/electrical connections to it can follow. Depends on whether the item is built into the structure or connected as equipment. |
| Pool & spa mechanical equipment | 5-year | Pumps, heaters, and filtration serving the amenity, distinct from the pool shell and surrounding deck (which are 15-year land improvements or 39-year building). Present only where the amenity exists. |
| Corridor & accent decorative lighting | 5-year | Decorative fixtures beyond the general illumination load may qualify; the base lighting that would exist in any building stays 39-year. The split is a judgment on which fixtures are design elements. |
| Exterior signage & monument identification | 15-year | Land improvement (Asset Class 00.3) where free-standing; a sign band bolted to the façade may instead follow the building. Distinguish the pole/monument structure from face electronics, which can be shorter-life. |
2Typical results and what drives the spread
A typical range for hotels and motels runs 6–35% — general industry experience for this property type, not an output of our engine. Where the operator leases rather than owns guest-room furnishings, the FF&E line shrinks and the reclassified share moves toward the lower half of the range — always reconcile to who holds title. Either way this is not a promise for any specific building — see by the numbers.
3By the numbers (original data)
4What a study costs for this type
Study fees track building size, documentation quality and whether an on-site inspection is performed. A hotel or motel study typically runs in the $10k–35k range — an indicative band, not a quote, since the fee scales with depreciable basis. See the pricing guide for how Cost Seg Smart's fees scale by basis and which providers publish prices at all; most competitors are quote-only.
5Provider comparison — the Top 5 for this asset class
Every provider below is scored on the same fixed rubric, weighting relevant hotel & motel evidence most heavily. Facts are drawn from each provider's public materials and dated.
| Provider | Score* | Relevant hotel & motel evidence | Profile | ||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cost Seg Smart site owner Engineering-first Best published pricing Best for virtual delivery Most transparent turnaround | 8.9How this score is built (sub-score ÷ 5 × weight):
| Dedicated page or article source · as of Jul 2026 | Profile → | ||||||||||||||||||||||||||||||||
| RE Cost Seg Engineering-first · National (Houston, TX) Best published pricing Best for virtual delivery Most transparent turnaround | 8.4How this score is built (sub-score ÷ 5 × weight):
| Dedicated page or article source · as of Jul 2026 | Profile → | ||||||||||||||||||||||||||||||||
| Engineered Tax Services (ETS) Engineering-first · National (West Palm Beach, FL) Best for national on-site coverage | 8.4How this score is built (sub-score ÷ 5 × weight):
| Dedicated page / named case study source · as of Jul 2026 | Profile → | ||||||||||||||||||||||||||||||||
| Source Advisors Engineering-first · National (Fort Worth, TX) Best for national on-site coverage | 8.4How this score is built (sub-score ÷ 5 × weight):
| Dedicated page or article source · as of Jul 2026 | Profile → | ||||||||||||||||||||||||||||||||
| CSSI Engineering-first · National (Baton Rouge, LA) Best for national on-site coverage | 8.1How this score is built (sub-score ÷ 5 × weight):
| Dedicated page / named case study source · as of Jul 2026 | Profile → |
Top 5 of 22 firms scored for hotel & motel. See every firm's full profile and per-type standing in the provider directory.
*Score is this site's published rubric output (0–10) for hotel & motel, weighting relevant property-type evidence most heavily (see how we compare) — click any score for its build-up. It is not a customer rating and no reviews are used. Cost Seg Smart is the site owner and is scored on the same rubric.
6Is it worth it — break-even
For a full-service hotel the present-value benefit generally clears a study fee comfortably once depreciable basis reaches the low seven figures, and sooner where owned FF&E is substantial or bonus depreciation applies. It is weakest for an asset near the end of a hold, where §1245 recapture on furnishings at a near-term sale erodes the timing gain.
7Frequently asked questions
What share of a full-service hotel typically reclassifies?
Published figures vary widely — from the mid-single digits for an older asset whose FF&E is already largely written off, to the low 30s for a furnishing-rich property. A full-service hotel carries a large 39-year core (structure, central HVAC, elevators, back-of-house), so it generally sits below the figures quoted for limited-service or interior-heavy assets. We have not calibrated a hotel-specific band of our own, so treat any single number for this type as an estimate to test against your actual FF&E ledger and purchase price allocation.
Does it matter whether we or the management company own the furniture?
Yes, materially. Only assets you own and depreciate can be reclassified on your return. If the management or franchise company holds title to guest-room FF&E, those items belong on their books, not yours, and the study must reconcile to the FF&E ledger rather than assume a per-key figure.
Can lobby and restaurant finishes really be five-year property?
Some can, where the finish is decorative rather than part of the building's structure or operation — feature walls, decorative millwork, accent lighting. The determination is item-by-item and depends on function, so it takes engineer review; general illumination and structural finishes stay 39-year.
How does bonus depreciation change the picture for a hotel?
Bonus depreciation lets qualifying shorter-life property (generally the 5- and 15-year lines) be deducted much faster in the placed-in-service year, which pulls the benefit forward. The applicable rate depends on when the asset was placed in service under the current phase-down schedule, so the timing value should be modeled to your specific year.
What happens to the furniture deductions when we sell?
Gain attributable to the reclassified §1245 personal property is generally recaptured as ordinary income on sale, while the building's §1250 gain is treated separately. That is why the strategy is strongest for a longer hold — a near-term sale can give back much of the accelerated timing benefit.
Sources and authority consulted
- Rev. Proc. 87-56 MACRS asset classes, as reproduced in IRS Pub. 946 App. B (Table of Class Lives and Recovery Periods)
- IRS Cost Segregation Audit Techniques Guide (Pub 5653)
- Cost Seg Smart per-vertical component engine (modeled ranges + component authorities).
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