§168(n)
Qualified production property
If the building houses manufacturing or another qualified production activity, the production portion of the building itself may be deductible in the year it is placed in service. QPP studies
Cost Segregation for New Construction
Ground-up construction produces the cleanest study there is. Every dollar has a line item, a drawing and a pay application behind it, so the study is built from real construction costs.
Every line already exists.
In an acquisition, Engineering has to reconstruct costs. In new construction the costs are already itemized in the contractor's schedule of values, the pay applications, the change order log and the drawing set. The study maps that documentation to recovery periods line by line.
Schedule of values to recovery periodIllustrative mapping
| Line item and source | Where it goes |
|---|---|
| Sitework, paving and site utilitiesCivil drawings, pay applications | 15-year |
| Concrete and foundationsStructural drawings | structureequipment foundations |
| Structural steel and framingStructural drawings | structure |
| Roofing and envelopeArchitectural drawings | structure |
| ElectricalElectrical drawings, change orders | buildingdedicated |
| Plumbing and HVACMechanical drawings | buildingprocess |
| Interior finishesFinish schedules | decorativestructural |
| Equipment and furnishingsSchedule of values | 5-year7-year |
| General conditions, fee and soft costsPay applications | allocated |
Each mapping traces to a pay application, a change order or a drawing sheet, so the classification is documented rather than estimated.
A better allocation and a stronger position
Developers need studies built from real construction costs and timed to the placed-in-service year. Direct-cost precision matters twice: the allocation is more accurate because nothing has to be estimated, and the audit position is stronger because every classification traces to a contemporaneous construction document.
General conditions, contractor fee and soft costs are allocated across the asset classes they relate to, on a supportable basis. Ignoring them understates the short-life population; assigning all of them to the structure is equally wrong.
If you self-performed part of the work, internal labor, equipment and material records stand in for a subcontractor's schedule of values. It changes the documentation, not the method.
Engage before the ceilings close
We can start before the certificate of occupancy. Systems that get buried in walls, above ceilings and under slab are far easier to document while they are still visible.
During construction
Record before concealment
Process piping, dedicated electrical, equipment pads and rough-in are photographed before drywall and slab cover them.
At completion
Final cost mapping
Final pay applications and the closed change order log are mapped to recovery periods. Retainage and late changes are reconciled.
Placed-in-service year
Schedule delivered
The fixed asset schedule for the year the building was placed in service, with line-item traceability behind every entry.
What else to look at on a new building
§179D
179D energy deduction
For projects whose construction began on or before June 30, 2026, a separate energy deduction may apply. 179D
Later
Partial asset dispositions
When components are replaced in later years, the remaining basis of what was removed can be written off. Dispositions
New construction questions
Still have a question? Ask Engineering.
Can you start before the building is finished?
Yes, and it is a good time to start. Systems that get buried in walls or above ceilings are far easier to document while they are still visible.
What about soft costs and the contractor's fee?
They are allocated across the asset classes they relate to, on a supportable basis. Ignoring them understates the short-life population; assigning all of them to the structure is equally wrong.
We self-performed part of the work. Does that complicate it?
No, it changes the documentation. Internal labor, equipment and material records stand in for a subcontractor's schedule of values.
Does anything else apply to new construction?
Often. Developers should look at partial asset dispositions on later renovations, qualified production property where the building houses manufacturing, and the 179D deduction for projects whose construction began on or before June 30, 2026.
Get a Commercial Savings Estimate
Fixed-fee proposal in 24 to 48 hours.
- Prepared by Engineering
- Lifetime audit defense
- NDAs available
info@senecacostseg.com
1210 Jackson St SE, Suite 2, Albany, OR 97322
Request your estimate
Estimates are prepared by our Engineering team.
Request received
Engineering will review the property and send your written estimate and proposal within 24 to 48 hours.
Preview site: this form is not yet connected, so nothing was sent.