A cultivation facility is one of the most equipment-dense buildings we model. Lighting, environmental control, fertigation and power distribution are engineered around the crop, not the structure, and they represent most of the build cost.
Before the engineering, the entity question. Section 280E limits deductions for businesses trafficking in controlled substances, and it can determine whether a cultivator or dispensary can actually use accelerated depreciation at all. The reclassification range on this page describes the property. Whether the resulting deduction is usable is an entity-level question for your CPA, it depends on your structure and your state, and it is the question to settle first. A study that produces a large deduction you cannot use has cost you a fee and bought nothing.
What reclassifies in a cannabis facility
5-year personal property (Section 1245)
- Grow lighting, fixtures, ballasts, controls and the dedicated branch circuits serving them
- Environmental control: dehumidification, dedicated HVAC serving grow rooms, CO2 systems and sensors
- Fertigation: tanks, pumps, dosers, filtration, irrigation lines and controllers
- Benching, rolling tables, vertical racking and trellis systems
- Extraction and processing equipment, and the dedicated services and ventilation serving it
- Drying and curing room equipment, environmental monitoring and compliance tracking systems
- Security: cameras, access control, vaults and alarm systems required by licensing
- Dispensary fixtures, display millwork, POS and IT
15-year land improvements (Section 1250)
- Parking, paving, curbing, bollards, security fencing and gates
- Site lighting, screening, landscaping, irrigation and drainage
- Monument signage where permitted
39-year structural (Section 1250)
- Shell, roof, structure, slab, interior partitions and standard finishes
- Base HVAC serving offices and general areas, building electrical service and general lighting
- Building fire protection, restrooms and standard plumbing
- Room construction: hardened walls, vapor barriers and sealed finishes in grow rooms
Retrofit is the normal case
Most cultivation sits in a converted warehouse or industrial building, which makes the study a two-part exercise: the acquired shell, and the build-out that turned it into a facility. Those usually have different placed-in-service dates and different bases, and keeping them separate is what makes each year’s deduction traceable. The build-out is typically where the reclassifiable value is concentrated.
Illustrative, modeled
On a $5M cultivation build-out with roughly $4.5M of depreciable improvement basis, an accelerated share near 40% moves about $1.8M into short-life pools, with lighting, environmental control and fertigation carrying most of it. This is a modeled figure rather than a completed client study, and its usability depends entirely on the 280E analysis above.
Cost Seg Smart scopes cannabis facility studies individually with engineer review of the cultivation systems. Fees are published at costsegsmart.com.
FAQ
Does 280E mean a study is pointless for us?
Not necessarily, and that is a determination for your CPA rather than for us. The analysis depends on your entity structure, on how your operations are separated, and on your state. What we would say plainly is that the answer belongs before the engagement, not after.
We lease the building. Is the build-out still ours to study?
If you paid for it, generally yes; it is your improvement. The lease and any landlord allowance establish the boundary, and cultivation leases often have unusual improvement provisions worth reading closely.
Is the electrical service upgrade reclassifiable?
The service entrance and main distribution serving the building are generally structural. Dedicated feeders, panels and circuits installed to serve identifiable grow equipment follow that equipment. Cultivation facilities usually have both, and the electrical drawings separate them.