Cost segregation in Lawrence follows the same federal rules that apply anywhere in the country, but the building you own here and the Massachusetts return you file shape what a study is worth. Two- and three-family rentals, converted mill space, production floors, and new market-rate housing each raise different questions before an engineer counts a single component.
As co-founder of Seneca Cost Segregation and a real estate investor myself, I have watched our engineers study everything from small Midwest single-family homes to manufacturing plants and 120+ unit hotels. Working with owners of older multifamily buildings, what we see consistently is a land figure copied from a rule of thumb, and that one number quietly caps every deduction that follows.
Below, I walk through the Lawrence property types that reclassify well, the Massachusetts rules that change your state return, what owners living in New Hampshire should plan for, and a worked three-family example with the federal and Massachusetts figures in one table.
TL;DR: Cost Segregation for Lawrence Owners
- ●Federal bonus depreciation can absorb short-life components in year one: qualifying components acquired and placed in service after January 19, 2025 are eligible for 100% bonus depreciation.
- ●A hypothetical $780,000 Lawrence three-family adds about $136,783 of year-one federal depreciation: at a 32% bracket, that is roughly $43,771 in federal tax, subject to the passive loss rules.
- ●Massachusetts runs on a slower schedule: the state did not adopt full expensing, so the same components depreciate over 5, 7, and 15 years on your state return.
- ●Manufacturers can write off qualifying production space itself: qualified production property can be deducted in full on the federal return, and Massachusetts follows for taxable years beginning in 2027.
- ●A landlord leasing a mill floor to a manufacturer gets no QPP deduction: the election belongs to owners who run the production themselves.
- ●New Hampshire residents still file in Massachusetts: Lawrence rent is Massachusetts-source income, and the decoupled state schedule goes on that nonresident return.
How Cost Segregation Works on a Lawrence Property
A study sorts the cost of your building into the recovery periods the tax code assigns to each part.
Left alone, the IRS treats a rental building as one asset recovered over 27.5 years, or over 39 years when it is nonresidential. An engineering-based study pulls out the pieces that belong in shorter classes:
- ●5-year property, such as appliances, carpeting, and furniture in rental units
- ●7-year property in commercial space, such as office furniture
- ●15-year land improvements, such as paved parking areas, walkways, and fencing
Components acquired and placed in service after January 19, 2025 can take 100% bonus depreciation on the federal return under the One Big Beautiful Bill. The binding written contract date decides when a property was acquired, so a Lawrence building you went under contract on before that date follows the prior-law phase-down rate for the year it was placed in service, such as 40% for 2025.
Lawrence Property Types and What a Study Finds
Four kinds of Lawrence property each raise their own classification questions.
Two-Family and Three-Family Rentals
Lawrence’s FY2026 tax roll counts only 4,293 single-family parcels, and the assessors report two-family and three-family homes as separate property types with average assessed values of $668,400 and $757,100. Buildings like these carry a kitchen, bath, and flooring package in every unit, plus shared site work, which is where much of the short-life cost sits.
Our guides to duplex cost segregation and triplex cost segregation show how the unit count changes the math. If you live in one unit, only the rented portion is depreciable, so your CPA allocates the cost between your home and the rental units before the study’s figures go on the return.
Converted Mill Buildings
Lawrence grew as a textile center along the Merrimack River, and a mill building converted to new uses often holds apartments, offices, and light industrial space under one roof. The use of each area decides its recovery period, so the study has to map the building floor by floor.
A building counts as 27.5-year residential rental property only when at least 80% of its gross rental income comes from dwelling units. A residential conversion with ground-floor commercial tenants can fall to the 39-year schedule if the commercial rent grows, so check the split against the rent roll each year.
Tenant fit-outs in a mill are placed in service on their own dates. A study timed to each phase gives every improvement the right class from the start, instead of leaving finished work buried in the building basis.
Manufacturing Space and Qualified Production Property
If you run a manufacturing operation in Lawrence, the One Big Beautiful Bill added a separate write-off for the building itself. Under IRC Section 168(n), you can elect to deduct the full cost of the portion of a nonresidential building you use as an integral part of manufacturing, refining, or agricultural or chemical production of tangible products, when the original use begins with you, construction began after January 19, 2025 and before January 1, 2029, and the property is placed in service before January 1, 2031.
The election comes with limits that matter in mill buildings:
- ●Owner-operators only: a lessee’s use does not count as the lessor’s use, so a landlord leasing a mill floor to a manufacturer cannot claim it.
- ●Production space only: offices, administrative areas, lodging, parking, sales, research, software development, and engineering space are carved out, so the building has to be allocated by use.
- ●Prior use matters on a purchase: an existing building you buy after January 19, 2025 and before January 1, 2029 can qualify only if no one used it in a qualified production activity between January 1, 2021 and May 12, 2025, you never used it before the purchase, and the statute’s other acquisition conditions are met.
- ●Recapture risk: moving the space to a non-production use within 10 years of placing it in service triggers Section 1245 recapture.
What we find on production buildings is that the floor, the offices, and the loading areas have to be measured separately before any QPP figure holds up. Seneca runs QPP studies alongside the standard component breakdown, and our guide to manufacturing facility studies covers the equipment-side assets that qualify either way.
New Housing and the HDIP Credit
Lawrence is one of the state’s 26 Gateway Cities, which makes market-rate housing in approved zones eligible for the Housing Development Incentive Program. HDIP pairs a local tax increment exemption negotiated with the city with a state tax credit on qualified project expenditures for the market-rate units.
Projects must be new construction or substantial rehabilitation with at least 80% market-rate units, and acquisition costs do not count toward the credit. A study on the finished project and the HDIP credit application both draw on the same construction records, so keep hard and soft costs organized by building area from the first draw.
Our page on new construction studies explains how a study reads a cost-to-build budget. Ask your CPA to confirm how the credit and the depreciation schedule interact before either is filed.
What Massachusetts Allows on the State Return
Your federal and Massachusetts returns start from the same study and then split, and the gap depends on what you own and when you placed it in service.
No Bonus Depreciation on the Massachusetts Return
Massachusetts did not adopt the One Big Beautiful Bill’s full-expensing provision for either the personal income tax or the corporate excise, according to the Department of Revenue’s TIR 26-4. On the state return, the reclassified components still depreciate over their 5, 7, and 15-year MACRS lives, which is slower than the federal write-off but far faster than the building schedule.
Massachusetts also keeps its own basis for each asset, adjusted every year, and figures your gain at sale with the state depreciation you claimed. Expect the Massachusetts gain to differ from the federal one, and keep both schedules with the study.
QPP Conformity Starts in 2027
TIR 26-4 lists the qualified production property deduction as adopted by Massachusetts for taxable years beginning on or after January 1, 2027, along with the higher Section 179 limits. A manufacturer that places a qualifying Lawrence building in service in a taxable year beginning before January 1, 2027 takes the QPP deduction on the federal return only, while the Massachusetts return for that year recovers the building under the regular state depreciation rules. Plan the timing with your CPA when a project could land on either side of that date.
The 5% Rate and the 4% Surtax
Massachusetts taxes rental income at a flat 5%, and income above $1,107,750 for tax year 2026 pays an extra 4% surtax. That puts the state value of each depreciation dollar at 5 cents for most owners and 9 cents above the surtax line, which is why the federal return carries most of a study’s first-year value.
Plan Ahead if You Live in New Hampshire
Owning a Lawrence rental from across the state line adds a filing step, though it rarely changes the federal math.
Massachusetts counts rent from real property located in the state as Massachusetts-source income for nonresidents, so you file a nonresident return and carry the decoupled depreciation schedule on it. The Department of Revenue’s nonresident guidance also caps the $25,000 rental real estate allowance on the Massachusetts passive loss computation at the amount you were allowed federally.
On the New Hampshire side, the state repealed its Interest and Dividends Tax for tax periods beginning on or after January 1, 2025. Ask your CPA whether any New Hampshire filing still applies to you, particularly if the property sits in an entity, and our New Hampshire cost segregation guide covers studies on property located in that state.
We see this consistently when coordinating with CPAs for owners who live in one state and rent in another. The federal schedule gets prepared first, the nonresident state schedule is left for later, and that is where the decoupling adjustment gets missed.
Use Lawrence Assessments to Split Land and Building
Land is never depreciable, so the share of the price you assign to it sets the ceiling on every deduction a study can produce.
IRS Publication 527 allows you to divide the price by the ratio of land to building in the assessed values when you are not certain of the fair market values. Lawrence’s FY2026 assessed values estimate market value as of January 1, 2025, based on 2024 sales, and the city’s online assessment database lists the values for each parcel.
Our guide on how to determine land value covers the other accepted methods, including appraisals and comparable land sales. Document whichever method you use, since the land figure stays with the property for its full depreciation life.
Lawrence has used split tax rates since fiscal year 1982, and the FY2026 rates set by the city are $8.64 per $1,000 for residential property and $18.06 for commercial, industrial, and personal property. A cost segregation study does not change either rate, and it is prepared for your income tax returns, so talk with your CPA before using study figures in any abatement or personal property filing.
Work Through a Lawrence Three-Family Example
Here is one hypothetical Lawrence three-family owned by an investor who lives in New Hampshire.
- ●Purchase price of $780,000, under contract and placed in service in April 2026
- ●25% of the price allocated to land using the assessor’s ratio, leaving a $585,000 building basis
- ●$140,400 reclassified: $86,400 of 5-year property and $54,000 of 15-year land improvements
- ●A 32% federal bracket and the 5% Massachusetts rate, with passive income or real estate professional status that lets the owner use the losses
The federal column takes the full $140,400 through bonus depreciation and adds the April first-year rate of 2.576% on the $444,600 that stays on the 27.5-year schedule. The Massachusetts column uses first-year MACRS rates of 20% for 5-year property and 5% for 15-year property, so the state benefit keeps arriving over the next several years.
Whether you can use the loss depends on the passive activity rules: the $25,000 allowance for active participants shrinks above $100,000 of modified adjusted gross income, disappears at $150,000, and any unused loss carries forward. Our article on whether cost segregation can offset W-2 income covers the exceptions.
How Seneca Runs a Study on a Lawrence Building
At Seneca, here is what the cost segregation study process looks like for Lawrence properties.
Step 1: Property Details and a Free Estimate
Send us the purchase price, closing date, and a few property details, and our engineering team builds a preliminary savings estimate from that information. The estimate and the proposal are free, and you pay only if you decide to move forward.
Step 2: A Tour Format That Fits the Building
You decide whether we see the property onsite or through a virtual walkthrough. Many commercial owners prefer an onsite tour, which suits mill and production space, and a virtual walkthrough works well for most two- and three-family rentals.
Step 3: Component Breakdown and Engineering Sign-Off
Our engineers document everything that makes up the property, from the structure and finishes to site work and the systems serving equipment, then assign each item a cost and a recovery period. Where QPP applies, the same breakdown separates production space from offices and other excluded areas, and our Head of Engineering signs off on every study before it goes out.
Step 4: Report Delivery and Real-Time Updates
Once we have the documents and access we need from you, we deliver the study in 5 to 10 business days, with real-time updates as it moves through each stage. Your CPA receives the component costs and recovery periods for the federal return and for the separate Massachusetts schedule.
Avoid These Mistakes on a Lawrence Study
Five errors can shrink or undo the benefit of a study on a Lawrence property.
- ●Assuming QPP on a leased mill floor: the statute ignores a tenant’s production use when the owner is the landlord, so the landlord has no claim to the deduction. Model the building on regular MACRS and bonus depreciation unless you run the production yourself.
- ●Carrying federal bonus onto the Massachusetts return: the state disallows it, which understates your state tax and leaves the state basis wrong at sale. Have your CPA keep a separate Massachusetts schedule from the first year.
- ●Guessing at the land share: an inflated land figure shrinks every deduction for as long as you own the building. Start from the assessor’s land-to-building ratio or an appraisal, and keep a record of the method.
- ●Mixing HDIP costs with acquisition costs: acquisition costs are ineligible for the credit, and a muddled cost file slows both the credit paperwork and the study. Track acquisition, hard, and soft costs separately by building area.
- ●Ignoring the passive loss limits: a large first-year loss may not offset wages once your income passes the allowance range, so the benefit can sit in carryforwards for years. Run the passive analysis with your CPA before you order the study.
Frequently Asked Questions
Below are the most common questions about cost segregation studies on Lawrence property.
What Seneca Brings to a Lawrence Study
Seneca does cost segregation and nothing else, and every study is produced by our in-house team, so you talk directly with the engineers on your file instead of a sales rep passing messages along. Each client works with a dedicated Project Manager, our Engineering team, and an Advisor, and every report passes the same internal review and a Head of Engineering sign-off before it reaches your CPA.
Our Engineering team has assessed 10,200+ properties with zero IRS audits triggered or lost, and audit defense comes with every study. We provide a full component breakdown on everything we study and run QPP studies for qualifying production buildings, across work that spans small Midwest single-family homes, multi-million-dollar mansions, self-storage facilities, 120+ unit hotels, and office buildings over 40,000 square feet.
To see a first number for your own building, start with our cost segregation calculator.
Conclusion
A Lawrence study pays off on the federal return first, where qualifying components can be written off in year one, and on the Massachusetts return over the following years. The property type then decides the details: a three-family raises land and passive loss questions, a mill raises use and QPP questions, and an HDIP project raises cost-record questions.
Owners who live in New Hampshire add a nonresident return to the plan, which is simple to handle when the study arrives with both schedules in mind.
When you want a number for your own building, run the calculator or request a free preliminary estimate, and our engineers will show you what a study would find before you spend anything.
