See if a study pays for itself on your rental

The short answer

Cost segregation is usually worth it when the tax value of the deduction is several times the fee, and when you can actually use the loss. A study moves the parts of a rental that wear out faster than the building (appliances, flooring, fixtures, site work) from 27.5 or 39 years into 5- and 15-year classes, which can take bonus depreciation in the first year. On most rentals bought for a few hundred thousand dollars or more, that first-year deduction is many times the cost of the study. It is worth less when the property is small, when you cannot use the loss this year, or when you plan to sell soon.

What decides whether it is worth it

1. 01

   What you paid

   The deduction scales with the depreciable basis: the price less land. Land never depreciates, so it comes off first. A higher price means a larger deduction against the same fixed fee.

2. 02

   The year you started renting

   The bonus rate is set by the year the property was placed in service: 100% from late 2017 through 2022, then 80, 60, and 40%, and 100% again for property acquired after January 19, 2025. A prior year is a lookback that catches up on this year's return.

3. 03

   Whether you can use the loss

   A short-term rental where you materially participate can offset W-2 income. A long-term rental's loss is usually passive: it offsets passive income, or W-2 income only with Real Estate Professional Status, and otherwise carries forward.

4. 04

   How long you will hold it

   Accelerated depreciation is partly recaptured when you sell. It still pays to take the deduction early, but the case is strongest when you plan to hold the property for years.

How cost segregation works, in two minutes

Bought years ago? Read how a lookback study catches up the years you missed. Renting short-term? See how the short-term rental strategy lets the loss offset W-2 income.

Common questions

Is cost segregation worth it?

Cost segregation is usually worth it when the tax value of the deduction is several times the fee, and when you can actually use the loss. A study moves the parts of a rental that wear out faster than the building (appliances, flooring, fixtures, site work) from 27.5 or 39 years into 5- and 15-year classes, which can take bonus depreciation in the first year. On most rentals bought for a few hundred thousand dollars or more, that first-year deduction is many times the cost of the study. It is worth less when the property is small, when you cannot use the loss this year, or when you plan to sell soon.

How much does a cost segregation study cost?

Unlevered's study for a single home is $2,500 for the PDF study, and $5,000 with the interactive 3D model and furniture scan. Multi-unit properties start at $7,500. Whether it is worth it depends on what the study finds, which is why the estimate above compares the tax value to the fee.

At what property price is cost segregation worth it?

There is no single cutoff, because land share, bonus year, and your tax bracket all move the number. As a rough guide, rentals bought for around $300,000 or more usually produce a first-year deduction whose tax value is several times the fee. Enter your own address and price above to see yours.

Is cost segregation worth it for a long-term rental?

Often, yes, but the timing of the benefit differs. A long-term rental's loss is usually passive, so unless you qualify as a real estate professional it offsets passive income or carries forward to future years and to the sale. The deduction is the same size; when you can use it is what changes.

Is it worth it if I bought the property years ago?

Usually. A lookback study catches up every year of missed depreciation on this year's return with Form 3115 and a §481(a) adjustment, with no amended returns. Pick the year you started renting in the estimate to see the catch-up.

When is cost segregation not worth it?

When the basis is small, when you cannot use the loss and do not expect to, or when you plan to sell within a year or two and recapture would take back most of the benefit. Your CPA confirms the position for your facts.