Childcare Cost Segregation Study

The Childcare Cost Segregation Study Built to Maximize Your Tax Savings

An in-house, CPA-led childcare cost segregation study that accelerates hundreds of thousands in deductions—often in the first year.

If you own the building where you operate your childcare center—or any commercial real estate—you may be depreciating it far slower than the IRS allows. Most property owners default to a 39-year straight-line depreciation schedule. But a properly performed childcare cost segregation study identifies components of your building that qualify for 5-, 7-, and 15-year accelerated depreciation—dramatically increasing your deductions in the early years of ownership. At Honest Buck, we perform childcare cost segregation studies in-house, with CPA oversight, giving you an accurate, defensible, and tax-optimized depreciation strategy.

Schedule a Free Property Review

See How It Works

5–7x

Typical acceleration of depreciation deductions in the first year of a childcare cost segregation study compared to standard straight-line depreciation

$50K–$500K+

Range of first-year tax deduction increases identified through childcare cost segregation studies, depending on property size and type

CPA-Led

Every childcare cost segregation study is performed and reviewed in-house by our CPA team—fully defensible and audit-ready

What Is a Childcare Cost Segregation Study
and Why Does It Matter?

When you purchase or construct a building, the IRS allows you to depreciate its value over 39 years (commercial property) or 27.5 years (residential). This is called straight-line depreciation—a slow, even deduction spread across decades.

But not every part of a building is the same. The IRS recognizes that certain building components have shorter useful lives and qualify for much faster depreciation schedules:

5-year property: Carpeting, decorative fixtures, certain appliances, specialized equipment
7-year property: Office furniture, certain equipment and fixtures
15-year property: Land improvements, parking lots, sidewalks, landscaping, fencing, playground structures

A childcare cost segregation study is an engineering-based analysis that identifies and reclassifies these components from 39-year real property to shorter-life personal property or land improvements. The result: significantly larger depreciation deductions in the early years of ownership—reducing your taxable income and your tax bill.

Bonus Depreciation Makes a Childcare Cost Segregation Study Even More Powerful

Under current tax law, bonus depreciation allows businesses to immediately deduct a large percentage of the cost of qualified property in the year it's placed in service—rather than depreciating it over 5, 7, or 15 years.

When you combine a childcare cost segregation study with bonus depreciation:

You identify which components qualify for shorter depreciation lives
Bonus depreciation then allows you to deduct a significant portion of those components in Year 1
The result: potentially hundreds of thousands of dollars in deductions in a single tax year

Note: Bonus depreciation percentages phase down over time under current legislation. A consultation with our team will reflect the current applicable rates and the optimal strategy for your situation.

Is Your Property a Good Candidate for a Childcare Cost Segregation Study?

A childcare cost segregation study delivers the most benefit when:

You own commercial property (not just lease it)

Your building's cost basis is $500,000 or more

You purchased, built, or renovated the property in the last 15 years

You are profitable and have taxable income to offset

You plan to hold the property for several more years

You have not previously had a cost segregation study performed

You recently purchased an existing building (look-back studies available)

You completed a significant renovation or buildout

Not sure if your property qualifies? We offer a free preliminary property review to help you determine whether a childcare cost segregation study makes financial sense—before you commit to anything.

Get a Free Preliminary Review

Childcare Properties We Analyze for Cost Segregation Studies

Property Type

Childcare centers and preschool buildings
Daycare center buildouts and tenant improvements
Commercial buildings purchased for childcare use
Newly constructed childcare facilities
Renovated or expanded childcare spaces
Mixed-use properties with childcare operations
Investment real estate owned by childcare operators

Whether you purchased an existing building, built from the ground up, or completed a major renovation—our childcare cost segregation study process identifies every component that qualifies for accelerated depreciation.

How Our Childcare Cost Segregation Study Process Works

Step 1:

Property Review & Feasibility

We review your property details, purchase price, construction costs, and current depreciation schedule to determine whether a childcare cost segregation study will deliver meaningful tax benefits. No cost, no obligation.

Step 2:

Document & Data Collection

We gather the necessary documentation: building plans, construction contracts, purchase agreements, closing statements, and any existing depreciation schedules. We make this process simple and organized.

Step 3:

In-House Childcare Cost Segregation Study

Our CPA team performs a detailed component-by-component analysis of your childcare property, identifying and reclassifying every qualifying asset. Each component is documented with IRS-supportable methodology and proper cost allocation.

Step 4:

Detailed Report & Tax Implementation

You receive a comprehensive written childcare cost segregation study report with all reclassifications documented. We then implement the new depreciation schedules directly into your tax return and capture your deductions immediately.

What a Childcare Cost Segregation Study Can Look Like in Practice

These are illustrative examples to show potential impact. Actual results vary based on property specifics, tax situation, and applicable law.

Single-Location Childcare Center

Property Details:

Property type: Single-story childcare center building
Purchase price / cost basis: $1,200,000
Year acquired: 2022

Without Childcare Cost Segregation Study:

Annual depreciation: ~$30,769 (39-year straight-line)
Year 1 depreciation: ~$30,769

With Childcare Cost Segregation Study:

Components reclassified to 5/7/15-year property: ~$350,000
Accelerated Year 1 depreciation (with bonus depreciation): ~$320,000+
Estimated additional Year 1 deduction: ~$290,000
Estimated tax savings (at 35% effective rate): ~$101,500

Multi-Location Childcare Operator

Property Details:

Property type: Newly constructed childcare building + 2 buildouts
Total cost basis across properties: $3,800,000
Year acquired / placed in service: 2021–2023

Without Childcare Cost Segregation Study:

Combined annual depreciation: ~$97,436 (39-year straight-line)

With Childcare Cost Segregation Study:

Components reclassified: ~$900,000 across all properties
Accelerated depreciation captured (with look-back study): ~$800,000+
Estimated additional deductions: ~$700,000
Estimated tax savings (at 35% effective rate): ~$245,000

Disclaimer Note:
Results vary. These examples are for illustrative purposes only and do not constitute a guarantee of tax savings. Individual results depend on property specifics, cost basis, applicable depreciation rules, and the taxpayer's overall tax situation. Consult with our team for a property-specific analysis.

Why Have Honest Buck Perform Your Childcare Cost Segregation Study

In-House CPA-Led Process

Unlike firms that outsource to third-party engineers, we perform childcare cost segregation studies in-house with CPA oversight. Your study is accurate, IRS-defensible, and fully integrated with your tax strategy.

Childcare Property Expertise

We specialize in childcare facilities specifically. We know the components, the buildouts, the playground structures, the kitchen equipment, and the tenant improvements that qualify—without missing opportunities unique to your property type.

Full-Service Tax Integration

We don't just hand you a childcare cost segregation study report. We implement the results directly into your tax return and coordinate your entire depreciation strategy—ensuring every deduction is captured correctly and defensibly.

Frequently Asked Questions About Childcare Cost Segregation Studies

A childcare cost segregation study is an engineering-based tax analysis that identifies building components in your childcare property qualifying for accelerated depreciation—5, 7, or 15 years—rather than the standard 39-year schedule for commercial property. Components like flooring, fixtures, playground structures, kitchen equipment, and land improvements often qualify. By reclassifying these components, you generate significantly larger tax deductions in the early years of ownership, reducing your taxable income and your tax bill. For childcare property owners with a cost basis of $500,000 or more, the tax savings often far exceed the cost of the study.

No. Cost segregation is a well-established, IRS-recognized tax strategy that has been upheld in court. When performed correctly with proper documentation, a childcare cost segregation study is fully defensible. Our studies follow IRS audit technique guidelines and include comprehensive documentation for every reclassified component—so you can be confident in the accuracy and defensibility of your results.

Study fees vary based on property type, size, and complexity. We provide a fixed-fee quote after the preliminary property review so there are no surprises. In most cases, the childcare cost segregation study fee is a small fraction of the tax savings generated—making the return on investment highly favorable for qualifying properties. We won't recommend a study unless the numbers clearly make sense for your situation. Schedule a free property review and we'll give you a straight answer.

Find Out If Your Childcare Property Qualifies—At No Cost

A free preliminary property review takes less than 30 minutes and will tell you whether a childcare cost segregation study makes financial sense for your property. No obligation. No pressure. Just clarity on whether this strategy can work for you.