Cost Segregation for Gyms and Fitness Centers: Reduce Your Tax Burden Fast

A few years ago, I was advising a small chain of boutique fitness studios in the Midwest. The owner had just finished renovating two leased locations. The owner had sunk well over $750,000 into everything from new cardio machines to branded lighting and specialty flooring. 

But when tax season rolled around, their CPA had treated nearly the entire buildout as 39-year property. It wasn’t until we introduced a cost segregation study that she realized they could have front-loaded over 30% of that investment into immediate depreciation. 

That single adjustment brought their effective tax liability down by nearly six figures, freeing up capital that went straight into expanding a third location.

That’s the kind of financial leverage cost segregation unlocks, especially in the fitness industry, where facility investments are constant, and equipment lifecycles are short. And now, with 100% bonus depreciation back on the table in 2025 for qualifying assets, gym owners can capitalize on even more tax savings.

Getting the right tax guidance is the starting point for turning facility upgrades into powerful financial wins.

Why Cost Segregation Works So Well for Gyms and Fitness Centers

Opening or upgrading a gym means spending serious money on things like equipment, flooring, lighting, signage, locker rooms, and interior buildouts. But when tax season arrives, most of those costs are typically treated as if they’re part of the building itself, stuck in a 39-year depreciation schedule.

That’s a problem, because many of these assets don’t last anywhere near that long. Treadmills wear out. Showers get remodeled. Rubber flooring gets replaced. And yet, without cost segregation, all of it is written off at the same slow pace as the roof and concrete foundation.

Cost segregation changes that. It’s a process that breaks your property into categories based on how quickly each part wears out or becomes obsolete. Items with shorter useful lives, like gym equipment, lighting systems, and even some tenant improvements, can often be depreciated over 5, 7, or 15 years instead of 39.

In some cases, they can be fully deducted in the first year thanks to 100% bonus depreciation rules now reinstated for property purchased and placed in service after January 19, 2025.

The effect is immediate. You lower your taxable income right away, improve your cash flow, and create space in your budget for reinvestment.

What Parts of a Gym Can Be Written Off Faster?

The tax code separates property into different “classes” based on how long assets are expected to last. A cost segregation study identifies which parts of your gym fall into shorter-lived categories so you can write them off faster.

Here’s how common gym components typically break down:

5-Year Property

These are assets that wear out quickly or are easily replaced:

• Cardio and strength equipment
• AV systems and speaker setups
• Freestanding lockers and benches
• Specialty lighting (non-permanent)
• Decorative fixtures and signage
• POS terminals, TVs, and other electronics

7-Year Property

Less common, but might include:

• Certain specialty furniture
• Commercial laundry equipment
• Sauna heaters or specialized spa devices

15-Year Property

These are land improvements and infrastructure, not directly part of the building:

• Parking lots and curbs
• Landscaping and outdoor signage
• Fencing or hardscape entry paths

Qualified Improvement Property (QIP)

This category includes interior improvements made to nonresidential buildings:

• Interior walls and partitions
• Flooring and ceilings
• Plumbing and electrical improvements are not part of the structural shell
• Studio buildouts, mirrors, and non-load-bearing upgrades

Under the current tax law, QIP is classified as 15-year property and fully eligible for 100% bonus depreciation when placed in service after January 19, 2025.

How the Process Works

Cost segregation isn’t something your regular CPA should try to handle alone. To do it properly and to stand up to IRS scrutiny, it needs to be performed by a specialist, typically an engineer working alongside a tax expert. Here’s how the process works when you bring in the right team:

1. Initial Assessment

A cost segregation firm will start by reviewing the size, cost, and type of your facility to determine if a study makes financial sense. For most gyms that have spent at least a few hundred thousand on buildouts or renovations, the answer is usually yes.

2. Gathering Documentation

You’ll be asked for construction budgets, invoices, purchase records, and any architectural or design plans. The more detail you can provide, the more precise the study will be.

3. Property Walkthrough and Inspection

An engineer conducts either a virtual site inspection or an in-person visit to document everything, from flooring and lighting systems to exterior improvements and specialty equipment. These observations are what allow components to be properly categorized and substantiated in the final report.

4. Asset Classification and Tax Mapping

The team then reclassifies assets into appropriate depreciation categories (typically 5, 7, 15, or 39 years) based on IRS guidelines. If the property was purchased and placed in service after January 19, 2025, qualifying items can be fully deducted thanks to 100% bonus depreciation.

5. Final Report and CPA Integration

You’ll receive a detailed report with depreciation schedules, photographs, cost breakdowns, and compliance documentation. Your CPA uses this to update your tax filings or amend a prior return if the property was already in use.

Turning Upgrades Into Tax Savings

Cost segregation allows gym owners to treat their facilities the way the IRS does, not as one big long-term asset, but as a mix of components that wear out, get replaced, or go out of style fast. With bonus depreciation now fully back in play, the window for significant tax savings is wide open.

If you’re planning a renovation or have recently invested in your space, it’s worth asking what those improvements are really worth, not just to your members, but to your bottom line. For gym owners considering cost segregation for gyms and fitness centers, R.E. Cost Seg offers engineering-backed studies designed to capture every eligible deduction. The right strategy starts with the right partner.