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Examples · made-up property

Tax studies for an apartment building developer, including section 460

Developers who build apartment communities, to keep or to sell.

How it works for this kind of property

An apartment community you keep is residential rental property, depreciated over 27.5 years. The study separates the 5-year property in the units and the 15-year site work (parking, paving, site lighting, fencing, pools and courts).

More on how it works

Section 460 sets when income from a construction contract is taxed. It applies when you build under a contract to sell, not when you build to keep. For contracts entered into in tax years beginning after July 4, 2025, the 2025 law exempts all residential construction contracts, including apartment buildings, from the percentage-of-completion method. Our engine checks 460 every time; for this example, a community kept as a rental, it does not apply, and the page says why.

Larger developers also get checks for the interest rules: interest paid while building is capitalized under section 263A(f), and the business interest limit under section 163(j) can matter.

Which of the 8 studies fit

StudyExample result
Faster depreciation (cost segregation)Counted in this example
Catch-up on past yearsDoesn't apply here
Inventory cost rules and accounting methodsFits, not counted here
When home-sale income is taxedDoesn't apply here
Energy-efficient home and building creditsDoesn't apply here
Energy-efficient buildings and solarDoesn't apply here
Research and hiring creditsWorth a question
Property and sales taxFits, not counted here
What the engine found, for your CPA

Example: We checked 69 strategies: 13 fit, 8 need a question, 44 don't apply, and 4 are protection checks.

  • Faster depreciation (cost segregation): 15-year site work (paving, lighting, fencing, landscaping); Bonus depreciation; Classification rules for this property type; Cost segregation on a building you built
  • Catch-up on past years: No property already on 2+ filed returns.
  • Inventory cost rules and accounting methods: Business interest limit (163(j)); Interest during construction (263A(f)); 263A cost rules
  • When home-sale income is taxed: No homes, condos or lots sold under contract.
  • Energy-efficient home and building credits: No ENERGY STAR or DOE Zero Energy Ready certification for the units; 45L requires certification before the credit is claimed.
  • Energy-efficient buildings and solar: Multifamily building of 3 stories: outside ASHRAE 90.1 scope (DOE 179D FAQ: multifamily of three stories or fewer is out of scope), so 45L only.
  • Research and hiring credits: Question: Paid family leave credit (45S)
  • Property and sales tax: Property tax appeal; Property tax review; Sales and use tax on construction

Common questions

Does section 460 apply to my apartment project?

Only if you build under a contract to sell before the building is done. For contracts entered into in tax years beginning after July 4, 2025, residential construction contracts, including apartment buildings, are exempt from the percentage-of-completion method; the 263A cost rules can still apply. If you build to keep, 460 does not apply.

What about interest during construction?

Interest paid while the building is being built is added to its cost under section 263A(f) unless a small-business exception applies. Our engine checks it with the study.

Does an engineer review a project this size?

When it has no LiDAR scan, yes, as part of the fixed price. With a LiDAR scan, a person (with an engineer where needed) checks it when the study's checks flag something, and every large-dollar study gets that check.

The rules behind it, for your CPA

Every number on this page is an example for a made-up property, computed by our engine. Not tax advice; your CPA reviews and files.