Senior living sits between an apartment building and a hospital, and the cost segregation follows the care level rather than the address. An independent-living community depreciates much like multifamily; a memory-care or skilled-nursing building carries clinical systems, wander management, commercial kitchen and laundry infrastructure that a residential template never looks for. Cost Seg Smart models senior and assisted living as a first-class type with a dedicated component library spanning both ends of that range.
The signature fact: the recovery period of the building itself is the first question, and it is not decided by the name on the sign. Property is 27.5-year residential rental only where the dwelling-unit test is met; a facility providing substantial personal services — meals, medication management, personal care — is generally 39-year nonresidential property. Independent-living communities of self-contained apartments frequently qualify as residential; assisted living, memory care and skilled nursing generally do not. This is worth settling with your CPA before the study, because it changes the depreciation of every dollar that does not reclassify, which is most of them.
Reclass benchmark for senior living
Engine-modeled accelerated reclass across standardized configurations:
| Care level | Typical accelerated reclass |
|---|---|
| Independent living, apartment-style units | 12–18% |
| Assisted living, standard amenity package | 16–22% |
| Memory care | 19–25% |
| Skilled nursing / high-acuity | 22–28% |
Typical bucket composition for an assisted-living community:
| Bucket | Median % of basis |
|---|---|
| 5-year (Section 1245 personal property) | 10–16% |
| 7-year (Section 1245 specialty) | 1–3% |
| 15-year (Section 1250 land improvements) | 4–8% |
| 39-year or 27.5-year (Section 1250 structural) | 72–85% |
The accelerated share rises with care level because acuity adds equipment. Nurse call, wander management, medication and therapy infrastructure, and a commercial kitchen and laundry sized for three meals a day are the difference between a memory-care building and an apartment block with a dining room.
What reclassifies in a senior living facility
5-year personal property (Section 1245):
- Nurse call and emergency response systems, pull cords, pendants, annunciator panels
- Wander-management and elopement systems, door controllers, resident tracking hardware
- Commercial kitchen equipment (ranges, ovens, walk-in refrigeration, dish machines, hoods where removable)
- Commercial laundry equipment (washers, dryers, folders, carts)
- Dining room and common-area furniture, casework and decorative millwork
- Resident-room furnishings where owned by the facility (beds, casegoods, seating)
- Salon, spa and barber equipment; therapy and rehabilitation equipment
- Activity, theater and AV systems; sound and paging distribution
- Security cameras, access control, monitoring hardware
- Decorative lighting throughout common and residential areas
- Carpet and removable floor coverings; window treatments
- Specialty plumbing serving the kitchen, laundry and therapy functions
- Dedicated HVAC serving the kitchen, laundry or a specific equipment load
7-year specialty (Section 1245):
- Built-in casework specific to the care operation (nurse stations, medication rooms, charting alcoves)
- Reception, concierge and administrative millwork
15-year land improvements (Section 1250):
- Parking, drop-off loop and porte-cochère foundations
- Secured courtyards, walking paths and outdoor therapy areas
- Landscaping, irrigation, raised beds, fencing and privacy screening
- Site lighting, monument signage, drainage
39-year or 27.5-year structural (Section 1250):
- Building shell, roof, structural frame, corridors and demising walls
- Base plumbing, electrical service and building HVAC distribution
- Elevators, and the emergency generator serving the building at large
- Grab bars, handrails and hard-wired life-safety systems built into the structure
- Fire sprinkler and alarm systems serving the building
What makes senior-living studies different
Acuity, not square footage, drives the result. Two buildings of identical size and vintage will reclassify differently if one is independent living and the other is memory care. The component library has to follow the care model, and a study that treats the property as generic commercial will miss the clinical and operational equipment that separates them.
Unit count multiplies small items into large ones. Nurse call devices, resident-room furnishings, window treatments and floor coverings are each modest per unit and substantial across 90 or 120 of them. Capturing them requires a per-unit takeoff rather than a building-level estimate.
The kitchen and laundry are an industrial facility inside a residential-looking building. A community serving three meals a day operates commercial food service and commercial laundry at a scale that carries real equipment value, along with the specialty plumbing, gas and dedicated exhaust that serve them.
Renovation and repositioning are constant. Communities are refreshed on cycles well short of 39 years, and units are converted between care levels. Component-level detail is what enables a partial disposition election when finishes or equipment are replaced, rather than continuing to depreciate assets that have been removed.
Illustrative (modeled, not a completed client study). On a $14M assisted-living community with roughly $11.5M in depreciable basis and a standard amenity package, an accelerated share near 19% would move approximately $2.2M into the 5- and 15-year pools. Actual results depend on care level, unit count, the kitchen and laundry build-out, documentation, and your CPA’s positions — including the residential-versus-nonresidential determination above.
Frequently asked questions
Is our building 27.5-year or 39-year property?
It depends on whether it meets the dwelling-unit test, not on what the community is called. Independent living made up of self-contained apartments often qualifies as 27.5-year residential rental; assisted living, memory care and skilled nursing, where substantial personal services are provided, are generally 39-year nonresidential. Settle it with your CPA first, because it governs the depreciation of the large majority of the basis that does not reclassify.
Does the emergency generator reclassify?
Generally not. A generator serving the building’s general electrical load is treated as a building system and stays with the structure. Where a generator or UPS serves an identifiable piece of equipment rather than the building at large, that portion is a different analysis.
What about grab bars, handrails and other accessibility items?
Items permanently built into the structure generally stay 39-year. Removable equipment serving resident care — lifts, therapy equipment, portable and pendant devices — is a separate class and typically reclassifies.
We operate under a lease or a management agreement. Who takes the depreciation?
Whoever owns the asset. The property owner depreciates the building and any FF&E the property owns; equipment owned by an operator or tenant is that party’s depreciation. The lease or management agreement defines the split, and it is worth confirming before the study so the basis analyzed is the correct one.
We bought the community several years ago and never did a study.
A lookback study is available. Your CPA files Form 3115 as a change of accounting method and the missed accelerated depreciation is taken in the current year as a §481(a) adjustment, without amending prior returns. Form 3115 support is included.
Does this work for a CCRC with multiple care levels on one campus?
Yes, and it usually should be analyzed building by building. A campus combining independent living, assisted living and skilled nursing can carry different recovery periods and materially different accelerated shares across its buildings, and a single blended analysis obscures both.
Get an engineered analysis of your community
Cost Seg Smart produces senior and assisted living studies across independent living, assisted living, memory care and skilled nursing, with published flat-rate pricing and Form 3115 support for lookback studies.