It's one thing to read about cost segregation in the abstract. It's another to see what the numbers actually look like on a real property. This walkthrough takes a single-family rental and shows exactly how a cost segregation study changes first-year depreciation and first-year tax savings, using real numbers you can follow end-to-end.
The punchline up front: on a $400,000 rental with a typical reclassification and 100% bonus depreciation (the rule that lets you deduct qualifying short-life assets entirely in the first year), the study generates roughly $46,000 of additional Year 1 deduction and about $14,800 of additional Year 1 tax savings at a 32% bracket. The $799 flat fee for the study is a small fraction of either number.
Here's how we get there.
The property
- Property type: Single-family rental
- Purchase price: $400,000
- Land value: $80,000 (20% of purchase price; land can't be depreciated)
- Building basis: $320,000 (the depreciable part: purchase price minus land)
- Acquired and placed in service: 2025, after January 19, 2025 (placed in service means ready and available to rent)
Without a study: standard 27.5-year treatment
Under MACRS (the IRS depreciation system), the default for a residential rental is to depreciate the full $320,000 building basis in equal amounts over 27.5 years.
- Year 1 depreciation: $320,000 ÷ 27.5 = ~$11,636
- Same amount every year for 27.5 years
With a cost segregation study
A study reclassifies eligible components into shorter recovery periods (5 or 15 years instead of 27.5, meaning faster deductions). For a typical single-family rental, a meaningful portion of building basis often qualifies:
| Asset class | Examples | Basis reclassified |
|---|---|---|
| 5-year property | Appliances, carpet, window treatments, fixtures | $32,000 |
| 15-year property | Driveway, landscaping, fencing, exterior lighting | $16,000 |
| 27.5-year (remaining) | Structural building components | $272,000 |
| Total building basis | $320,000 |
Year 1 depreciation with 100% bonus (OBBBA, acquired after Jan 19, 2025)
The One Big Beautiful Bill Act (signed July 4, 2025) permanently restored 100% bonus depreciation for property acquired after January 19, 2025. Short-life components qualify for full first-year expensing.
| Component | Basis | Year 1 treatment | Year 1 deduction |
|---|---|---|---|
| 5-year property | $32,000 | 100% bonus | $32,000 |
| 15-year property | $16,000 | 100% bonus | $16,000 |
| 27.5-year property | $272,000 | Standard MACRS | $9,891 |
| Total Year 1 | $57,891 |
Year 1 comparison
- Standard treatment: $11,636
- With cost segregation + 100% bonus: $57,891
- Additional Year 1 deduction: ~$46,255
At a 32% marginal rate (the tax rate on your last dollar of income), that acceleration could represent roughly $14,800 in additional first-year tax savings. At 24%, approximately $11,100.
Important context
- This is acceleration, not elimination. Larger early deductions reduce what's available in later years. The total depreciation over the life of the asset is unchanged.
- Depreciation recapture (the tax you pay back on prior depreciation when you sell) applies at sale. Your CPA should model the full picture, not just Year 1.
- Actual reclassification percentages vary by property. Furnished rentals, renovated properties, and properties with more site improvements typically show higher short-life percentages.
- Whether to take bonus depreciation, and whether your state follows the federal rules, are decisions for your CPA at filing time.
The ROI on the study itself
In this example, the additional Year 1 tax savings at a 32% rate (~$14,800) is more than 18 times the $799 flat fee. For properties with meaningful building basis, the margin is usually wide.
Your CPA can run a quick projection before you order, to confirm the math works for your specific situation.
How the process works
- Submit core property details: address, purchase price, placed-in-service date, and a land value estimate
- Provide supporting documents if available (appraisal, settlement statement, photos)
- Receive a complete report with component-level classifications, allocated basis, and an analysis of how bonus depreciation applies to your property
Reports typically delivered in 2 business days with a final quality check included.
To see what the numbers look like on your own property, use the free cost segregation calculator. When you're ready, start your study.