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Cost segregation savings

How much extra year-one depreciation tax savings could a study produce?

Your numbers

Year-one tax savings after study cost

$27,089

Depreciable building basis$360,000
Basis moved to short-life property$90,000
Bonus depreciation$90,000
Extra year-one depreciation vs 27.5-year straight line$86,727
Tax savings before study cost$32,089

Tip. Educational estimate with the assumptions listed on this page. Not tax, legal, or investment advice.

Assumptions

  • Building recovery is 27.5-year straight line with no mid-month convention.
  • Reclassified property uses a 5-year remainder after bonus.
  • This does not test passive-activity, at-risk, or taxable-income limits.

Explore the numbers

Examples

Load a scenario, then change one input at a time.

Example 1

Small STR

A $450k basis with 25% reclass and 100% bonus.

Year-one tax savings after study cost

$27,089

Example 2

Conservative reclass

Same property, 15% reclass and a 32% rate.

Year-one tax savings after study cost

$10,152

Example 3

No bonus

Older placed-in-service assumption at 40% bonus.

Year-one tax savings after study cost

$26,358

What this calculates

Estimate first-year tax savings from reclassifying rental basis into short-life property, bonus depreciation, and a study fee.

How to use it

  1. Start with purchase basis and a conservative land percentage.
  2. Enter the share a study would likely move into personal property or land improvements.
  3. Stress the tax rate. If a few points of rate flip the net, get a real quote.

Common mistakes

  • Modeling bonus you cannot use because of passive or taxable-income limits.
  • Ignoring recapture when you sell.
  • Treating the study cost as optional documentation.

Formula

Extra dep ≈ bonus on reclassified basis + remaining short-life dep − 27.5-year straight line. Savings = extra dep × tax rate − study cost.

FAQ

Is this a cost segregation study?

No. It is a planning screen so you can decide whether to price a study. The study creates the allocations your CPA files.

What bonus rate should I use in 2026?

Qualifying property acquired after January 19, 2025 can use 100% bonus. Confirm placed-in-service dates with your advisor.

Do I need to be a real estate professional?

Not always. Short-term rental material participation can matter more for W-2 owners. This calculator does not test those hours.

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