Examples · made-up property
Cost segregation for a 4-plex rental you bought
Investors who own duplexes, triplexes and fourplexes as rentals.
How it works for this kind of property
A residential rental building is depreciated over 27.5 years. A cost segregation study pulls out the parts with shorter lives: appliances, carpet and window coverings in each unit (5-year property), and the paving, walkways, fencing and landscaping outside (15-year property).
More on how it works
The IRS's 2025 residential rental guidance keeps more of an apartment in the building than older templates did, such as cabinets, counters and general wiring. Our engine follows that guidance, so the range is what the rules support, not the largest number possible.
Bonus depreciation can deduct the shorter-life parts in the first year. For a purchase, the closing date (or the date of a binding contract) sets the bonus rate.
Which of the 8 studies fit
| Study | Example result |
|---|---|
| Faster depreciation (cost segregation) | Counted in this example |
| Catch-up on past years | Fits, not counted here |
| Inventory cost rules and accounting methods | Fits, not counted here |
| When home-sale income is taxed | Doesn't apply here |
| Energy-efficient home and building credits | Doesn't apply here |
| Energy-efficient buildings and solar | Doesn't apply here |
| Research and hiring credits | Worth a question |
| Property and sales tax | Fits, not counted here |
What the engine found, for your CPA
Example: We checked 69 strategies: 11 fit, 4 need a question, 50 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 bought
- Catch-up on past years: Accounting method changes (Form 3115)
- Inventory cost rules and accounting methods: Cash method for small businesses
- When home-sale income is taxed: No homes, condos or lots sold under contract.
- Energy-efficient home and building credits: Bought from someone else: 45L goes to the eligible contractor that built the home and had basis in it during construction (Notice 2023-65 sec. 5.02), not to a later buyer.
- Energy-efficient buildings and solar: Bought an existing building: 179D is for energy-efficient lighting, HVAC/hot water or envelope property the owner installs (new or as a retrofit) with a certified energy model.
- Research and hiring credits: Question: Paid family leave credit (45S)
- Property and sales tax: Property tax appeal; Property tax review
Common questions
Can the extra depreciation offset my wages?
Usually not right away. Rental losses are passive unless you qualify as a real estate professional who materially participates, or for the smaller $25,000 allowance at lower incomes. Losses you cannot use now carry forward. Your CPA decides how they apply to you.
Does the closing date matter?
Yes. 100% bonus depreciation applies to property acquired after January 19, 2025. The closing date or the binding contract date decides it, not the date the units were ready to rent.
Is a 4-plex big enough to be worth a study?
The price is fixed by building size, so the fee is known before you start. The example on this page shows the range next to the fee, and your free estimate does the same for your own property.
The rules behind it, for your CPA
- Pub. 946 (2025) Table B-1 asset class 00.3 Land Improvements
- 26 U.S.C. 168(b)(2)(A)
- Pub. 5653 Ch. 2 L(5)
- Notice 2026-11
- Treas. Reg. 1.168(k)-2(b)(3) original use / used property (5-calendar-year lookback)...
- Instructions for Form 4562 (2025)
- Rev. Proc. 2015-13 (as modified)
- Rev. Proc. 2025-23, as modified by Rev. Proc. 2025-28 and Rev. Proc. 2026-32
- Instructions for Form 3115 (Rev. December 2022)
- LB&I practice unit COR-C-011 (rev. 3/20/25)
- LB&I practice units 'Accounting Method Basics' and 'Identifying and Handling Claims...
- 26 USC 448
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.