Cost Segregation Calculator
Estimate Year-1 bonus depreciation and tax savings from a cost segregation study: land split, 5-year and 15-year buckets, and the with/without comparison. Free planning estimate, no sign-up.
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Quick Answer
Cost Segregation Calculator helps you estimate year-1 deduction with cost segregation of $130,182 and year-1 deduction without cost segregation of $14,545 using the assumptions on this page.
Key Takeaways
- Cost Segregation Calculator gives a direct estimate using the inputs shown in the calculator form.
- Start with the split most estimates get wrong. Of the $500,000 purchase price, 20% — $100,000 — is land, which never depreciates. The remaining $400,000 is the building basis everything else is calculated from. A cost segregation study then reclassifies part of that basis out of the slow 27.5-year straight line: here $80,000 lands in 5-year personal property (carpet, appliances, dedicated plumbing and electrical) and $40,000 in 15-year land improvements (parking, landscaping, site work), leaving $280,000 in the building structure at $10,182 a year.
- On these assumptions — $400,000 of depreciable basis after land, 20% reclassified to 5-year and 10% to 15-year property, 100% bonus — Year 1 deducts $130,182 with a study versus $14,545 without, an extra $115,636. At a 24% bracket that is roughly $27,753 of additional Year-1 tax savings. Your split will differ: the reclassification percentages are property-specific findings of an actual study, not constants.
Calculation Output
Year-1 Deduction with Cost Segregation
$130,182
Year-1 Deduction without Cost Segregation
$14,545
Extra Year-1 Deduction
$115,636
Estimated Year-1 Tax Savings
$31,244
Savings as % of a 20% Down Payment
31.2%
Land Value (not depreciable)
$100,000
Depreciable Building Basis
$400,000
5-Year Property (bonus-eligible)
$80,000
15-Year Land Improvements (bonus-eligible)
$40,000
Building Structure (straight-line)
$280,000
Annual Building Depreciation
$10,182
Result Chart
Year-1 Deduction with Cost Segregation
$130,182
Year-1 Deduction without Cost Segregation
$14,545
Extra Year-1 Deduction
$115,636
Estimated Year-1 Tax Savings
$31,244
Savings as % of a 20% Down Payment
31.2%
Key Facts
| Year-1 Deduction with Cost Segregation | $130,182 |
|---|---|
| Year-1 Deduction without Cost Segregation | $14,545 |
| Extra Year-1 Deduction | $115,636 |
| Estimated Year-1 Tax Savings | $31,244 |
| Savings as % of a 20% Down Payment | 31.2% |
| Land Value (not depreciable) | $100,000 |
How This Calculator Works
- Start with the split most estimates get wrong. Of the $500,000 purchase price, 20% — $100,000 — is land, which never depreciates. The remaining $400,000 is the building basis everything else is calculated from. A cost segregation study then reclassifies part of that basis out of the slow 27.5-year straight line: here $80,000 lands in 5-year personal property (carpet, appliances, dedicated plumbing and electrical) and $40,000 in 15-year land improvements (parking, landscaping, site work), leaving $280,000 in the building structure at $10,182 a year.
- Bonus depreciation is what turns that reclassification into a Year-1 event. At 100% bonus, the entire 5-year and 15-year buckets — $120,000 — are deductible in the first year, on top of the building's $10,182. Total Year-1 deduction with segregation: $130,182. Without a study, the same property deducts only $14,545 in Year 1. The study moves $115,636 of deductions from future decades into the first year — it accelerates them; it does not create new ones.
- At a 24% marginal bracket, that timing is worth real cash: about $31,244 of Year-1 tax savings with segregation versus $3,491 without, an extra $27,753. Against a 20% down payment of $100,000, the Year-1 savings alone equal 31.2% of the cash you put in — the screening number investors use to decide whether a paid study is worth ordering. Two cautions belong next to that number: the savings are only usable if you have income the losses can offset (passive-activity and basis rules decide that, with material-participation and real-estate-professional exceptions), and the deductions pulled forward mean smaller deductions later, plus potential recapture on sale.
- Land percentage is the swing variable, so test it before you trust any estimate. Every extra 5 points of land value at this price removes about $8,136 from the Year-1 deduction — at 25% land the Year-1 figure falls to $122,045. High-land-cost markets (coastal lots, small buildings on expensive dirt) routinely see 30–40% land allocations, which is why two otherwise identical $500k properties can produce very different studies. If your county assessor splits land and improvements, start from their ratio and sanity-check it, rather than accepting a default 20%.
- This is a planning estimate, not an engineered study and not tax advice. It applies typical reclassification percentages to your inputs and shows the arithmetic; it cannot see your property's actual components, placed-in-service dates, prior depreciation, or whether specific assets qualify. Bonus depreciation at 100% applies to qualified property acquired after January 19, 2025 under the One, Big, Beautiful Bill (IRS Notice 2026-11); property acquired earlier follows the old phase-down schedule, and some categories are excluded. A filing-grade study — the kind that holds up under IRS examination — requires an engineer-signed report, typically starting around $1,500–$1,800 for a small residential rental, and a CPA to apply the result to your situation. Use this page to decide whether that conversation is worth having, then have it.
FAQ
How much does cost segregation add in Year 1 on a $500,000 rental?
On these assumptions — $400,000 of depreciable basis after land, 20% reclassified to 5-year and 10% to 15-year property, 100% bonus — Year 1 deducts $130,182 with a study versus $14,545 without, an extra $115,636. At a 24% bracket that is roughly $27,753 of additional Year-1 tax savings. Your split will differ: the reclassification percentages are property-specific findings of an actual study, not constants.
What if the land is worth more than the default percentage?
Land is the biggest lever in the estimate because it shrinks every bucket at once. Each additional 5 points of land value on this property cuts the Year-1 deduction by about $8,136 (to $122,045 at the next step up). Get the land split from your appraisal or county assessor before running the numbers — a 35%-land property modeled at 20% overstates Year-1 savings by tens of thousands of dollars.
Is bonus depreciation really 100% in 2026?
Yes, for qualified property acquired after January 19, 2025. The One, Big, Beautiful Bill restored 100% bonus depreciation permanently and removed the phase-down for that property (see IRS Notice 2026-11 for the interim guidance). The controlling date is when the property was acquired — with written-binding-contract rules that can push an acquisition earlier — not simply when it was placed in service. Property acquired on or before January 19, 2025 still follows the old 40%/20% phase-down percentages for its placed-in-service year.
27.5 or 39 years — which building life applies?
Residential rental property (where tenants live, generally on stays of 30+ days) depreciates over 27.5 years. The 39-year life applies to nonresidential property — including many short-term rentals where the average stay is 7 days or less, which makes the lodging 'transient use' rather than residential. This example uses 27.5 years; if you run an Airbnb-style operation, test 39 — it lowers the building's annual deduction (here from $10,182), though the 5- and 15-year buckets that drive the Year-1 number are unaffected. The STR angle cuts both ways: transient-use properties face the longer building life, but active STR owners may also qualify to use the losses against other income under the material-participation exception — a CPA question, not a calculator one.
What does an engineered cost segregation study cost, and when is it worth it?
Engineer-signed studies for small residential rentals typically start around $1,500–$1,800 and rise with property size and complexity. The rough screening test is the one this page computes: if the estimated Year-1 tax savings ($31,244 here) are a large multiple of the study fee AND you have income the losses can actually offset, the study usually pays for itself in Year 1. If the savings would sit suspended under the passive-activity rules, the acceleration may be worth little until you can use it — which is why the study decision and the tax-situation decision are the same decision.
Does accelerating depreciation create a tax bill later?
It can. Depreciation taken now reduces your basis, so a later sale can trigger depreciation recapture — generally taxed at up to 25% on the unrecaptured Section 1250 portion for the building, and ordinary rates on 5- and 15-year personal property — plus capital gains on a lower basis. Cost segregation trades today's deduction for a potentially larger bill at sale; 1031 exchanges and holding until a basis step-up are the common ways investors manage that, and both are squarely CPA territory.