Cost Segregation Calculator
Calculate Year 1 accelerated depreciation deductions and cash tax savings through cost segregation. Model bonus depreciation across multifamily, commercial, and STR properties.
Property Profile & Basis
Select property category and bonus depreciation tax year.
Accelerating Real Estate Depreciation with Cost Segregation
Cost segregation is an IRS-recognized engineering study that breaks down residential (27.5-year) and commercial (39-year) real estate into shorter-life personal property (5-year) and land improvements (15-year). Combined with federal bonus depreciation under the Tax Cuts and Jobs Act, real estate investors can front-load massive tax write-offs into Year 1, creating substantial non-cash paper losses to shelter rental and active income.
Key Wealth & Tax Features
Asset Class Reclassification Engine
Separates depreciable basis into 5-year personal property (appliances, carpeting, specialty electrical) and 15-year land improvements.
TCJA Bonus Depreciation Phase-Down
Models statutory bonus depreciation rates across 100%, 80%, 60%, 40%, and 20% phase-down tax years.
Property Category Presets
Pre-configured asset allocation benchmarks for Multifamily, Airbnb Short-Term Rentals, Industrial Warehouses, and Medical Offices.
Cash Tax Savings Computation
Calculates immediate cash saved on your federal tax return based on your marginal income tax bracket.
Net Present Value (NPV) Analysis
Demonstrates the time value of money benefit of taking tax deductions today rather than waiting 27.5 to 39 years.
Syndication & LP Ready Export
Export structured cost segregation metrics for private placement memorandums (PPMs) and investor updates.
Strategic Financial Applications
- ✓Multifamily Real Estate Syndicators
Deliver 50% to 80% Year 1 passive paper losses to accredited limited partners to offset passive income.
- ✓Short-Term Rental (STR) Investors
Utilize the 'STR tax loophole' (Treas. Reg. Section 1.469-1T) to offset W-2 tech or medical income without qualifying as a full-time real estate professional.
- ✓Commercial Property Owners
Evaluate whether commissioning an engineering cost seg study ($3,000 - $7,000 fee) provides a positive 10x+ ROI.
- ✓Real Estate CPAs & Tax Strategists
Benchmark prospective commercial acquisitions during client tax planning sessions.
Frequently Asked Questions
How does cost segregation work?
Cost segregation identifies and reclassifies building components that are not structural (such as decorative lighting, custom millwork, landscaping, paving, and carpeting) into 5-year or 15-year personal property, allowing them to be depreciated immediately using bonus depreciation.
What is bonus depreciation in 2024, 2025, and 2026?
Under the Tax Cuts and Jobs Act (TCJA), bonus depreciation was 100% through 2022, 80% in 2023, 60% in 2024, 40% in 2025, and 20% in 2026 (unless renewed or modified by federal tax legislation).
Can cost segregation losses offset W-2 or active income?
Generally, real estate depreciation creates passive losses that only offset passive income. However, two major exceptions exist: (1) Qualifying as a Real Estate Professional (REPS) under IRC Section 469(c)(7), or (2) Owning Short-Term Rentals (STRs) with an average guest stay of 7 days or less where you materially participate for 100+ hours.
What is depreciation recapture upon property sale?
When you sell the property, accelerated depreciation taken on 5-year personal property is subject to ordinary income recapture tax under Section 1245. Many investors defer this recapture indefinitely by executing a Section 1031 exchange.
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