Depreciation is one of the most valuable tax tools for rental property owners. It allows you to deduct basis over time, which can lower taxable income while preserving cash flow.
Standard residential depreciation
For residential rental property, the building basis is generally depreciated over 27.5 years. Land is not depreciable, so basis allocation between building and land is a key first step.
How cost segregation changes the timing
Cost segregation identifies components that may be depreciated over shorter recovery periods (often 5, 7, or 15 years). That shifts more depreciation into earlier years compared with straight-line-only treatment.
Where bonus depreciation fits
Bonus depreciation may apply to eligible short-life components depending on acquisition date, placed-in-service date, and current law. Because rules have changed over time, filing treatment should be confirmed each year.
Practical CPA checklist
- Confirm building and land basis support
- Validate placed-in-service date
- Review component-level classifications
- Confirm federal and state treatment before filing
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