Cost Segregation -- What is the true benefit of the accelerated depreciation?

[Bob Dole]

All,
Apologies for the newb question, but I just heard about cost segregation and have been reading up about it online.

My understanding is this (and please correct me where I'm wrong):
Pros:
-accelerate depreciation, front load (vs. just a straight line over 39 years)
-save money on taxes because of the depreciation

Cons:
-if I sell the property, the recapture will be larger
-not recommended if you flip properties

So hypothetical situation:
-Majority of our income is W2 based, let's say it's $500k
-Net income from commercial rental is $100k
-Income from dividends and interests is $100k
-Both of us are full time W2, so non-prof real estate (but this can change  -- please see below)

So we're hypothetically grossing $700k a year.  If we do cost segregation how much would we reduce our taxes by?

-Purchased a commercial property this year for ~$2m.  The estimate I have from a cost segregation firm is $316k (w/ study) vs $28k (no study)
-Assume we're in the 37% bracket
  -Does this mean, I can claim a $117k depreciation deduction for this year?  Essentially lower my taxable income by $117k?!  So instead of a $700k income, we'd be looking at $583K instead?  

As I mentioned above, we're both W2 employee.  But one of us no longer is a w2 employee as of Oct 1.  Can this person now be "a real estate" professional?  What's the advantage here?  BTW, the rental property is cash flow positive.

[Costin I.]

@Bob Dole Two other benefits of CSS and accelerated depreciation via a cost segregation study: partial disposition and the death step-up basis.  

1. Partial Disposition Benefit: In a cost segregation study, components of a property are identified and depreciated on shorter schedules (like 5, 7, or 15 years). When an owner replaces or retires certain items (e.g., lighting, HVAC, or carpeting), they can claim a deduction for the remaining undepreciated value of those items. This allows the owner to “write off” the value of disposed assets immediately, rather than continuing to depreciate them. The result is an immediate tax benefit in the year of disposition, reducing taxable income.
2. Death Step-Up Basis: (bummer, you have to die for this benefit to kick in, but...) When an owner passes away, the property’s tax basis is reset to its fair market value on the date of death (this is known as the “step-up basis”). A prior cost segregation study increases the depreciation taken during the owner’s lifetime, lowering taxable income each year. Then, at death, the property’s basis resets, effectively erasing the accumulated depreciation. This benefit allows the owner’s estate or heirs to receive the property at a new, higher basis—reducing capital gains taxes if they choose to sell the property after inheriting it.

In short, partial disposition allows tax deductions for retired property components during ownership, while the death step-up basis resets the property’s depreciated value, providing tax relief for heirs. Both offer valuable tax strategies, particularly when cost segregation is applied early.