A few years back, I was asked to advise a client who had just converted an old industrial building into a luxury event venue. Think exposed brick, uplighting along every wall, a state-of-the-art AV setup, and landscaped outdoor spaces that rivaled anything in a design magazine. He was rightfully concerned about his accountant classifying all of the investment’s assets under the standard 39-year building category.
After walking the property with an engineer and gathering cost documentation, we identified close to 22% of the build-out that could be accelerated. We ran a full cost segregation study and allowed the owner to deduct the entire accelerated portion in the first year. Delivering a six-figure tax benefit and freeing up capital, he used to fund additional marketing and staffing.
That experience underscored what I’ve seen again and again: event venues are tailor-made for cost segregation. They’re rich with short-life assets, frequently updated, and especially under the 2025 tax law updates, they’re positioned to benefit more than ever.
How Cost Segregation Works for Event Spaces
At its core, cost segregation is the process of identifying and reclassifying the components of a building into different asset classes for depreciation purposes. Rather than treating the entire property as a single 39-year structure, a detailed study separates out shorter-life assets, often substantial in event spaces, into 5-, 7-, and 15-year categories.
For event venues, those assets often include:
- Interior finishes: high-end flooring, decorative wall coverings, millwork, partitions
- Lighting and AV: programmable lighting systems, sound equipment, projection setups
- Kitchens and bars: commercial-grade appliances, built-ins, walk-in coolers
- Outdoor features: patios, landscaping, exterior lighting, hardscaping
- Furnishings: modular stages, banquette seating, movable walls, display fixtures
A proper engineering-based study doesn’t just accelerate depreciation; it anchors the results in IRS-compliant methodology, protecting you in case of an audit while maximizing your allowable deductions.
Bonus Depreciation’s Impact on Event Venue Investment
One of the most significant developments this year was the restoration of 100% bonus depreciation under new federal legislation. For assets acquired and placed in service after January 19, 2025, eligible property can now be fully deducted in the first year, reversing the scheduled phase-down that was previously in effect.
This has major implications for event venue owners:
- Any newly acquired or renovated venue can potentially deduct all qualifying short-life assets upfront.
- Certain improvements, such as lighting, AV, and non-structural interior finishes, now offer immediate tax advantages.
- The Section 179 expense limit was also increased to $2.5 million, expanding flexibility for smaller or mid-sized venues.
Timing and asset classification matter more than ever. Properties placed in service after the 2025 threshold may see drastically different outcomes than those initiated earlier, even if the renovations are similar in scope.
How to Know If Cost Segregation Is Worth It for Your Venue
Cost segregation can generate major tax savings, but not every event venue will see the same return. Before you commit to a study, it’s worth asking whether your property has the right characteristics to justify the effort and cost. Here’s what matters most:
- Acquisition or renovation cost
A larger basis gives you more to work with. If your total investment is on the lower end, or if most of it went toward structural elements, the benefit may be limited. - Asset mix
Venues rich in non-structural features, like lighting, sound, landscaping, or custom finishes, are ideal candidates. The more you’ve invested in guest-facing spaces, the more value a study can uncover. - Timing
To qualify for 100% bonus depreciation, your property must have been acquired and placed in service after January 19, 2025. If you miss that window, your eligible deductions may be reduced. - Hold period
Accelerated depreciation increases your upfront cash flow, but it also impacts your tax position when you sell. That tradeoff often works in your favor (especially if you’re holding for five years or more), but it should be modeled carefully. - State tax conformity
Your state may not follow federal depreciation rules. In those cases, your federal return will show major gains, but the state-level benefit may be smaller.
Bottom line: If you’ve invested heavily in finishes, fixtures, or tech and you’re planning to hold the property for at least a few years, it’s likely worth pursuing a cost segregation study under the current rules.
How to Prepare for a Successful Cost Segregation Study
Cost segregation can deliver meaningful tax advantages, but only when it’s done right. A strong study is equal parts technical and strategic. If you’re considering one for your event venue, here’s what to have ready before engaging a firm:
- Accurate cost records
Aim for itemized documentation( by contractor, vendor, or system) rather than lump sums. This detail is critical for properly allocating costs to the correct asset classes. - Plans or layouts
Architectural drawings or site plans help distinguish between different use areas (guest-facing vs administrative, indoor vs outdoor). These distinctions matter, especially under the 2025 bonus depreciation rules. - Recent improvements
Renovations made after January 19, 2025, may qualify for 100% bonus depreciation. Track these upgrades separately so they don’t get buried in the overall building cost. - Work with your CPA
A cost segregation study doesn’t operate in a vacuum. It needs to be integrated into your broader tax and entity strategy, especially if you hold multiple properties or operate through layered ownership structures. - Choose the right cost segregation firm
This part is non-negotiable. A credible, engineering-based firm will provide a defensible study with detailed asset breakdowns and audit-ready documentation. Avoid template-based or overly aggressive providers; cutting corners here increases your risk without increasing your benefit.
Why Strategic Tax Planning Starts with the Right Property Breakdown
Cost segregation isn’t just a way to accelerate deductions. It’s a tool for improving cash flow, reinvesting earlier, and building a stronger financial position for your event venue. With the 2025 bonus depreciation changes now in effect, the potential upside has never been greater.
But timing, execution, and provider quality all matter. If your venue has recently been acquired, renovated, or expanded, now is the right moment to reassess whether your current depreciation schedule is working in your favor.
To explore how cost segregation for event venue owners applies to your specific property, reach out to R.E. Cost Seg for a tailored study.
Ready to begin your tax savings journey?
