What a cost segregation study does
A residential rental building is normally depreciated over 27.5 years. A cost segregation study splits the purchase price into parts. Items like appliances, furniture, carpet, and some fixtures are 5-year or 7-year property. Driveways, fencing, and landscaping are often 15-year property. The rest stays 27.5-year property.
Short-life property can use bonus depreciation. Property acquired after January 19, 2025 can qualify for 100% bonus depreciation under current law. That moves a large deduction into the first year.
How this calculator works
It removes the land share, because land is not depreciable. It moves the reclass percent of the building into short-life property and applies your bonus rate. It compares that first-year depreciation with plain 27.5-year straight line. The difference times your tax rate is the gross savings, and the study fee comes off the top.
With the default inputs, a $450,000 basis, 20% land, and 25% reclass give $90,000 of short-life property. At 100% bonus and a 37% rate, the estimate is about $27,000 of net savings in year one.
When the savings are real
A large loss only helps if you can use it. Rental losses are passive for most people. They offset W-2 or business income only if you qualify as a real estate professional or the property meets the short-term rental rules with material participation. If not, the loss may carry forward. Check the STR loophole qualifier and the REPS hours tracker on this site before you buy a study.
Inputs to stress test
Typical reclass shares run from about 15% to 35%, depending on the property type and how it is furnished. Land share depends on the county assessment. Try a lower reclass share and a lower tax rate. If the savings still beat the study fee by a wide margin, a quote is worth getting.
The trade-off at sale
Faster depreciation now can mean more tax when you sell. Depreciation on short-life property can be recaptured as ordinary income, and building depreciation can be taxed up to 25%. The depreciation recapture calculator shows that side of the math.