Restaurant & QSR

Restaurant & QSR Cost Segregation

Restaurants and quick-service properties carry a large amount of short-life property. Kitchen equipment, kitchen-equipment hook-ups and equipment exhaust hoods, drive-through equipment, and decorative millwork can move out of 39-year property into 5- and 15-year accelerated schedules; the share of the depreciable basis depends on the property's own cost detail.

A document-driven, human-reviewed study identifies each qualifying component — producing a large first-year deduction you can take immediately or carry forward.

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ClickDrag Finance: restaurant cost segregation

$499* / $15,000

A $499* cost segregation workpaper for a rental property, for owners and advisors (*for a property whose purchase price plus construction costs total under $2.0 million); a $15,000 study up to $250 million in purchase price plus construction costs.

Delivered in 15–20 business days

Our document-driven, human-reviewed process typically returns your study 15–20 business days after complete documents are in — so you can amend or file on schedule.

Fully documented

Built to the IRS Cost Segregation Audit Techniques Guide with full asset detail, cost documentation, and component-level classifications.

Why do restaurants carry so much short-life property?

Restaurants and QSRs carry so much short-life property because a large share of their construction budget goes into components the IRS treats as personal property or land improvements rather than the structural shell, the part a standard commercial building recovers over 39 years.

The IRS cost segregation guide, the Cost Segregation Audit Techniques Guide (ATG), has a restaurant industry matrix (Chapter 7.C) that puts food storage and preparation equipment, kitchen equipment hook-ups and equipment exhaust hoods (ventilation only when it exists solely for the kitchen equipment), the face of a menu or theme sign, and readily removable canopies that are not part of the structural shell at 5 years under asset class 57.0. For property acquired after January 19, 2025, bonus depreciation under IRC §168(k) is 100%, so that 5-year property is deducted in the year it is placed in service. A properly prepared study also captures the 15-year land improvement category (asset class 00.3) for drive-through paving, sign poles and pylons, and site work — a secondary acceleration layer most operators miss.

Year-end planning

Placing a property in service this tax year?

Property placed in service (ready and available for its intended use) by December 31, 2026, for a calendar-year taxpayer, can be depreciated on that taxpayer's 2026 return, including the shorter-lived property a cost segregation study identifies.

The checklist lists 10 things to confirm before a cost segregation study and the return, with the rule behind each one. See what is on the year-end checklist.

Which restaurant and QSR components get a shorter recovery period, and under what authority?

At a glance

We publish no planning band for a restaurant or QSR: the share that moves out of 39-year property depends on the property’s own cost detail, and we do not estimate one without it.
Under Rev. Proc. 87-56, office furniture and communications equipment are 7-year property (class 00.11) and computers 5-year (class 00.12), and personal property (§1245) that no other asset category describes is 5-year property under asset class 57.0 when it is used in an activity that class covers, which includes wholesale and retail trade and personal and professional services; for a landlord, the class is generally the one for the activity the tenant primarily uses the property in (Treas. Reg. §1.167(a)-11(e)(3)(iii); ATG Ch. 6.C.5).
Land improvements are 15-year property under asset class 00.3; qualified improvement property (§168(e)(6)) is 15-year property only when it is an improvement made by the taxpayer to an interior portion of a nonresidential building and placed in service after the building was first placed in service, other than an enlargement, an elevator or escalator, or the internal structural framework; the building and its structural components (Treas. Reg. §1.48-1(e)(2)) stay 39-year nonresidential real property.
The IRS publishes an industry matrix for restaurant and QSR property in its Cost Segregation Audit Techniques Guide (ATG Ch. 7.C, Restaurant Exhibit A); the guide says that where a taxpayer’s return position is consistent with the matrix, “examiners should not make adjustments to categorization and lives,” and that the directive “is not an official pronouncement of the law or the position of the Service and cannot be used, cited, or relied upon as such.”

restaurant and QSR components, their tax treatment, Rev. Proc. 87-56, 1987-2 C.B. 674 asset class, GDS recovery period and the authority for each
Component	Treatment	Asset class / statute	GDS recovery	Source and condition
Food storage and preparation equipment: the machinery, equipment, furniture and fixtures that process food from storage to the customer	Personal property (§1245)	57.0 Distributive Trades and Services	5-year	ATG Ch. 7.C, Restaurant Exhibit A, "Food Storage & Preparation Equipment"
Kitchen equipment hook-ups: water and gas lines to equipment, special drain lines, a kitchen air makeup unit and equipment exhaust hoods	Personal property (§1245)	57.0 Distributive Trades and Services	5-year	ATG Ch. 7.C, Restaurant Exhibit A, "Kitchen Equipment Hook-ups"Ventilation counts only when it exists solely to meet the ventilation requirements of the kitchen equipment; restroom plumbing, kitchen hand sinks and the building’s piping are 39-year building components.
Separate kitchen HVAC and refrigeration units, including those for walk-in freezers and coolers	Personal property (§1245)	57.0 Distributive Trades and Services	5-year	ATG Ch. 7.C, Restaurant Exhibit A, "Heating, Ventilating & Air Conditioning"Only units that meet the sole justification test, installed solely because the kitchen equipment or the foodstuffs require that temperature or humidity; the central HVAC system is a 39-year building component.
Signs for menu display or theme identity (for a pylon sign, the sign face only)	Personal property (§1245)	57.0 Distributive Trades and Services	5-year	ATG Ch. 7.C, Restaurant Exhibit A, "Signs"Exit signs and restroom identifiers are 39-year building components; the pole or pylon itself is a 15-year land improvement.
Readily removable canopies and awnings, inside or outside	Personal property (§1245)	57.0 Distributive Trades and Services	5-year	ATG Ch. 7.C, Restaurant Exhibit A, "Canopies & Awnings"Not canopies that are an integral part of the building’s structural shell.
Decorative millwork and theme décor: crown moldings, lattice work, decorative cabinets and counters	Personal property (§1245)	57.0 Distributive Trades and Services	5-year	ATG Ch. 7.C, Restaurant Exhibit A, "Millwork – Decorative"Restroom cabinets and counters, and general millwork such as doors and frames, are 39-year building components.
Drive-through equipment: order-taking, delivery and payment systems	Personal property (§1245)	57.0 Distributive Trades and Services	5-year	ATG Ch. 7.C, Restaurant Exhibit A, "Drive-Through Equipment"Drive-through bays, doors and windows are building components.
Kitchen drainage and grease trap	Contested: personal property (§1245) or building component (§1250)	57.0 Distributive Trades and Services	5-year	ATG Ch. 7.C, Restaurant Exhibit A, "Plumbing" (kitchen drainage); Morrison, Inc. v. Commissioner, 891 F.2d 857 (11th Cir. 1990)The cases disagree: the matrix and Morrison treat kitchen drainage, grease trap included, as §1245 property, but La Petite Academy v. United States, 95-1 USTC ¶50,193 (W.D. Mo. 1995), aff’d, 72 F.3d 133 (8th Cir. 1995), held a kitchen grease trap to be §1250 property, so the facts of the installation decide it (ATG case table, Ch. 6.D).
Site work: paving and parking areas, curbing, sidewalks, fencing, landscaping, site drainage	Land improvement (§1245 or §1250)	00.3 Land Improvements	15-year	ATG Ch. 7.C, Restaurant Exhibit A, "Site Work"
Interior improvements made after the building was first placed in service	Building component (§1250)	Qualified improvement property, §168(e)(6)	15-year	§168(e)(6) and §168(e)(3)(E)(vii); ATG Ch. 6 (pp. 86–87)Qualifies as qualified improvement property only when it is an improvement made by the taxpayer to an interior portion of a nonresidential building and placed in service after the building was first placed in service, and never for an enlargement, an elevator or escalator, or the internal structural framework.
Building shell, central HVAC, building plumbing, fire protection, building wiring and general lighting	Building component (§1250)	Nonresidential real property (building or structural component)	39-year	Treas. Reg. §1.48-1(e)(2), quoted in ATG Ch. 2; ATG Ch. 7.C, Restaurant Exhibit A

Sources

IRS Cost Segregation Audit Techniques Guide (Publication 5653, rev. 2-2025)
IRS Publication 946, How To Depreciate Property (2025), Appendix B — Table of Class Lives and Recovery Periods, which reproduces the asset classes of Rev. Proc. 87-56, 1987-2 C.B. 674

GDS recovery periods shown; the alternative depreciation system uses longer ones. A classification depends on the facts of the installation, and a study documents them line by line. This table is general information, not tax advice.

Engineering-based or document-based: how is a restaurant cost segregation study built?

The $15,000 cost segregation study is document-driven: it applies an engineering principles-based methodology, the cost classification approach described in the IRS Cost Segregation Audit Techniques Guide (Publication 5653), to the property's own documents and to photographs linked to the components they support, with a qualified human review of every component.

A restaurant study moves a lot of cost out of 39-year property, so the documentation behind it matters. Studies that rely on industry averages or unsupported allocations leave those percentages unexplained. Our studies are built to the IRS Cost Segregation Audit Techniques Guide standard:

Asset-level detail for every reclassified component
Cost source documentation tied to construction contracts and AIA schedules
Component-level classifications — not rule-of-thumb percentages
Recovery period citations to IRS ATG and relevant Tax Court precedent
Qualified improvement property (QIP) treatment for tenant build-outs

What typically moves — restaurant / QSR

5-year personal property

Kitchen equipment, equipment hook-ups, menu and theme sign faces, decorative millwork

15-year land improvements

Paving, drive-through lanes, pole-mounted site lighting, landscaping

39-year structural shell

Structure, roof, general building systems

We do not publish a planning band for restaurants. Actual results depend on construction scope, tenant build-out vs. fee-simple, and document quality.

Built for franchise operators and multi-unit QSR owners

Multi-unit QSR operators often have a portfolio of similarly constructed locations — the same prototype building, the same equipment package, the same drive-through layout. That consistency is a cost seg advantage: once the asset breakdown is established for one location, the study framework transfers across the portfolio with minimal incremental work.

Whether you own a single pad-site restaurant, a ground-up QSR prototype, or a portfolio of franchise locations, each property qualifies for its own study — and lookback studies can capture missed deductions on properties you placed in service in an earlier tax year without amending returns (via a Form 3115 cost segregation method change).

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Restaurant cost segregation FAQ

How much of a restaurant or QSR can be reclassified?

Restaurants and QSRs carry a lot of short-life property, and we do not publish a planning band for them: the share of the depreciable basis (purchase price plus construction costs, less land) that moves out of 39-year property depends on the property's own cost detail. The IRS’s restaurant matrix (Cost Segregation Audit Techniques Guide, Ch. 7.C) puts food storage and preparation equipment at 5 years; kitchen equipment hook-ups and equipment exhaust hoods at 5 years, with ventilation counted only when it exists solely to meet the kitchen equipment’s ventilation requirements; the face of a menu or theme sign at 5 years, but not exit or restroom signs; readily removable canopies at 5 years, but not canopies that are part of the structural shell; decorative millwork at 5 years, but not restroom cabinets and counters or general millwork such as doors and frames; and site work at 15 years. The table on this page gives the source for each.

What restaurant assets qualify for accelerated depreciation?

Under the IRS’s restaurant matrix, commercial kitchen equipment is 5-year property; so are kitchen equipment hook-ups (water, gas and drain lines to equipment, and equipment exhaust hoods), with ventilation counted only when it exists solely to meet the kitchen equipment’s requirements; separate kitchen HVAC and refrigeration units, including those for walk-in coolers and freezers, only when they meet the sole justification test; the face of a menu or theme sign; readily removable canopies and awnings that are not part of the structural shell; decorative millwork other than restroom cabinets and counters; and drive-through order and payment equipment. Drive-through paving, sign poles and other site work are 15-year land improvements. The cases disagree on a kitchen grease trap (Morrison treated kitchen drainage as §1245 property, La Petite Academy held a grease trap §1250), and restroom plumbing, the central HVAC and the building’s fire protection stay 39-year property.

How much does a restaurant cost segregation study cost?

The $499* cost segregation workpaper covers a rental property, ordered by the owner or by a CPA or advisor for a client (*for a property whose purchase price plus construction costs total under $2.0 million). Our $15,000 study covers a property whose purchase price plus construction costs total up to $250 million; an owner whose property is under $2.0 million is offered the workpaper instead. Above $250 million in purchase price plus construction costs, the study is scoped on a call with an advisor, and if you are not sure of the figure, Howard reaches out personally.

Does cost segregation work on a leased restaurant build-out?

A tenant’s build-out is qualified improvement property (QIP), 15-year property, when it is an improvement the tenant makes to an interior portion of the building and places in service after the building was first placed in service, other than an enlargement, an elevator or escalator, or the internal structural framework; a cost segregation study can then identify the personal property within that build-out, such as kitchen equipment, kitchen-equipment hook-ups and decorative millwork, which the IRS restaurant matrix puts at 5 years under class 57.0.

How is a restaurant cost segregation study documented?

Our studies follow the methodology in the IRS Cost Segregation Audit Techniques Guide and include full asset-level detail, cost source documentation, and component-level classifications. We do not produce summary-only or "rule of thumb" studies.

Which IRS asset class and recovery period apply to restaurant and QSR property in a cost segregation study?

Each component’s recovery period follows from its Rev. Proc. 87-56 asset class or its statutory category, as set out here. Under Rev. Proc. 87-56, office furniture and communications equipment are 7-year property (class 00.11) and computers 5-year (class 00.12), and personal property (§1245) that no other asset category describes is 5-year property under asset class 57.0 when it is used in an activity that class covers, which includes wholesale and retail trade and personal and professional services; for a landlord, the class is generally the one for the activity the tenant primarily uses the property in (Treas. Reg. §1.167(a)-11(e)(3)(iii); ATG Ch. 6.C.5). Land improvements are 15-year property under asset class 00.3; qualified improvement property (§168(e)(6)) is 15-year property only when it is an improvement made by the taxpayer to an interior portion of a nonresidential building and placed in service after the building was first placed in service, other than an enlargement, an elevator or escalator, or the internal structural framework; the building and its structural components (Treas. Reg. §1.48-1(e)(2)) stay 39-year nonresidential real property. The IRS publishes an industry matrix for restaurant and QSR property in its Cost Segregation Audit Techniques Guide (ATG Ch. 7.C, Restaurant Exhibit A); the guide says that where a taxpayer’s return position is consistent with the matrix, “examiners should not make adjustments to categorization and lives,” and that the directive “is not an official pronouncement of the law or the position of the Service and cannot be used, cited, or relied upon as such.”

Is ClickDrag Finance's restaurant cost segregation study engineering-based?

In its method, yes, for the study: ClickDrag Finance's restaurant study applies an engineering principles-based methodology to your documents and photographs. The $15,000 cost segregation study is document-driven: it applies an engineering principles-based methodology, the cost classification approach described in the IRS Cost Segregation Audit Techniques Guide (Publication 5653), to the property's own documents and to photographs linked to the components they support, with a qualified human review of every component.

Ready to capture your restaurant's accelerated depreciation?

Document-driven, human-reviewed and fully documented, one location or a full QSR portfolio. For CPAs and advisors, the $15,000 study is typically delivered 15–20 business days after complete documents are in.

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ClickDrag Finance as your restaurant and QSR cost segregation provider

We run cost segregation on restaurant and quick-service property, where kitchen equipment, kitchen-equipment hook-ups, decorative millwork and drive-through site work are the components that move out of the 39-year nonresidential bucket.

Price: $499 for a cost segregation workpaper on a rental property whose purchase price plus construction costs total under $2,000,000 — a workpaper for the taxpayer's tax preparer, reviewed before release, typically ready 3–5 business days after all required documents are in. $15,000 for the cost segregation study, for a property whose purchase price plus construction costs total up to $250,000,000 — qualified human review and oversight, typically delivered 15–20 business days after complete documents are in. Above $250,000,000, the scope is agreed on a call with an advisor before any price is quoted. Both are offered to owners and to CPAs or advisors acting for a client; the property's purchase price plus construction costs decide which one applies.
Eligibility: No unit-count limit and no hard minimum. A cost segregation study is worth it when three conditions hold together: the basis is large enough for the accelerated deductions to outweigh the fee (roughly $500K of basis for a study priced in the thousands of dollars, which is a pricing threshold rather than a tax rule, and lower for a lower-priced report), the deduction is usable this year given the owner's passive-activity position, and the hold is long enough to survive recapture. All three, or the honest answer is no.
What is included: Component-level classification documented to the IRS Cost Segregation Audit Techniques Guide, reconciled to your depreciable basis, with a depreciation schedule and a fixed-asset import template for your CPA, built from your documents and from photographs linked to the components they support.
Payment: The workpaper is paid in full at checkout; a study starts with a call and a proposal. All fees are non-refundable except as required by applicable law (see our terms).

Start your cost segregation study · Full pricing and eligibility · How we compare to other providers, including where a cheaper one is the better buy

Educational information, not tax advice. No estimate is a completed cost segregation study.

Who reviews and who signs a ClickDrag Finance cost segregation study?

Question	$499* workpaper	$15,000 study
Who reviews it?	It is reviewed before release.	A qualified human review of every component, with a project manager on the engagement.
Who signs it?	It is a workpaper for the taxpayer's tax preparer, prepared from the information the buyer provides.	ClickDrag Finance signs the study (black label), and its signer block names its preparers: Howard Krieger (MBA, former ASA), Managing Director; and Robert H. Hutchins (CPA (Inactive), CVA (Emeritus)), Senior Tax Advisor.
Does a cost segregation study include a site visit?	It is prepared from the documents and photographs the buyer provides.	It can include a site visit, by appointment, and a visit is preferred; when a site visit is not feasible because of cost or timing, the property is documented from its own records and from photographs linked to the components they support, and each photograph’s embedded date and location data are read and recorded.
What audit support comes with it?	The workpaper and its stated procedures.	The deliverable itself is the support: the written study, with its methodology, cost sources and per-component classification rationale.

*For a property whose purchase price plus construction costs total under $2.0 million.

Our terms set out the terms of each product.