Michael HenningerCEO/Founder, Main Street CFO & Tax Advisors · Founder of Main Street CFO and Tax Advisors

Partial Asset Dispositions #paylesstaxes #taxtuesday

13 Oct 2026 · 2 min

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1:30

In this segment, the speaker explains how owners of commercial or rental properties should handle the tax treatment when replacing a building component, such as a roof, on a property that is depreciated over a long recovery period (e.g., 39 years). The old component is removed from the depreciation schedule, and the remaining undepreciated basis of that component can be fully deducted in the year of replacement—a process known as a partial asset disposition. The speaker highlights the difficulty of determining the component’s value at the time of replacement and points out that a cost segregation study can simplify this by providing a detailed, itemized basis for each building component. By referencing the cost segregation line item for the roof, owners can calculate the remaining basis and claim the full write‑off in the year of replacement. The speaker emphasizes that this deduction is often overlooked and encourages viewers to reach out with questions.

Chapters

So what happens if you have a rental build? Say you have a commercial property that you're depreciating over 39 years and you have to replace a component of that building, like the roof, right? Essentially, you would be ripping off the old roof, putting on the new one. Now, that old roof that you just got rid of, you're not— you shouldn't be continuing to depreciate that over the balance of that life. You have the new roof to depreciate over the life of that building. So what happens to the old one? Well, that's what a partial asset disposition is. And that's where we, we have like a component that we've replaced. The replaced component, whatever's left of that piece gets to— gets fully deducted in the year that it's replaced. Okay, you're right off the balance of that. Now the question comes up to say, okay, how do you value that? Well, that's where it gets a little hairy. And that's also when something like a cost segregation study has even added more value because that cost segregation study is going to itemize all these components from that building and there's going to be a line item for the roof. that you could say, okay, well, at the time that we replaced it, it had this value based and tied back to that cost segregation study, and this is what's left on that specific component that we replaced, and that's what we're going to deduct in the year that it's replaced. So again, there's a lot to this, but it's just something that is kind of missed a lot of times when people are replacing parts of their building or the rental property. You want to make sure that you get that write-off for the piece that you replace, and you're going to have to figure out how to value that at that time. So if you have any questions about how that works, hit me up. Talk soon.