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Common rates: 24%, 32%, 37%, 39.6%
Estimated First-Year Tax Savings
$61,673 – $83,258
At 32% tax rate · Multifamily (27.5-yr schedule)
Reclassified to 5 & 15-yr Property
$200,000 – $270,000
20%–27% of purchase price · deducted in Year 1 vs. over 27.5 yrs
*Incremental savings vs. standard 27.5-yr straight-line depreciation. Assumes ~20% land value. Does not constitute tax advice.
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How It Works
Cost segregation isn't a loophole — it's an IRS-recognized engineering study that changes which depreciation schedule your building components fall under.
A CSSI-certified engineer inspects or reviews plans for your property and identifies every component — roofing, wiring, landscaping, flooring — and assigns each to its correct MACRS class life.
Instead of depreciating the entire building over 27.5 or 39 years, 20–35% of the cost is moved to 5 and 15-year property, eligible for 60–100% first-year bonus depreciation under current law.
You claim the accelerated depreciation on your tax return. For a $2M property at a 37% rate, this typically means $150k–$270k in tax savings in Year 1 alone — without selling or refinancing.
The Tax Cuts and Jobs Act of 2017 introduced 100% first-year bonus depreciation for qualifying 5, 7, and 15-year MACRS property. This allowed investors to immediately deduct the full value of reclassified components in Year 1. The rate has since phased down — it was 80% in 2023, 60% in 2024, and 40% in 2025 — but pairing cost segregation with any remaining bonus depreciation still produces outsized front-loaded deductions compared to straight-line schedules.
Short-term rentals rented for fewer than 7 days average stay are not classified as "rental real estate" under IRC §469. This means losses from a cost segregation study on an STR property can offset active ordinary income — including W-2 wages and business income — without the $25,000 passive-loss cap or the real-estate professional designation required for long-term rentals. For high-income earners in the 37%+ bracket who own even a single Airbnb-style property, this is one of the most powerful tax strategies available.
Under the Modified Accelerated Cost Recovery System (MACRS), personal property like appliances, carpeting, and certain fixtures depreciate over 5 or 7 years using a 200% declining-balance method. Land improvements such as parking lots, landscaping, and sidewalks qualify for a 15-year, 150% declining-balance schedule. Both classes accelerate deductions dramatically compared to the 27.5-year residential or 39-year commercial straight-line default. A cost segregation study is the IRS-required documentation to substantiate these reclassifications in an audit.
We provide preliminary studies at no cost and charge only upon completion of a full engineering report. Our studies include detailed asset schedules, IRS audit support documentation, and a cost basis reconciliation your clients can hand directly to their tax preparer. We maintain E&O insurance and stand behind every report in the event of an IRS challenge.
$2.4B+
Depreciation Identified
3,800+
Studies Completed
48 hrs
Preliminary Study Turnaround
100%
IRS Audit Success Rate
FAQ
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