Cost Segregation on a $300K Rental Property: $48,000 in Accelerated Depreciation

Even a modest rental property contains thousands of dollars in reclassifiable building components that most investors leave on the table.

$48,000 Accelerated Depreciation

$17,760 Est. Year-1 Tax Savings

22x Return on Study Cost

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Property Type

Purchase Price

$17,760

Estimated Year-1 Tax Savings

$48,000

Accelerated Deductions

$795

Study Cost

22x

ROI on Study

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Estimates are for illustration only. Details

What This Means for a $300,000 Rental Property

$300,000 Rental Property property — cost segregation depreciation example

The conventional wisdom that cost segregation "isn't worth it" for properties under $500K is outdated. At $300K, a single-family rental still generates roughly $48K in accelerated depreciation — translating to about $18K in year-one tax savings against a study cost of $795. That's a 22x return.

The components that get reclassified in a typical SFR include: electrical outlets and wiring dedicated to appliances (5-year), cabinetry and countertops (5-year), carpet and vinyl flooring (5-year), decorative lighting fixtures (5-year), landscaping and irrigation (15-year), driveways and sidewalks (15-year), and fencing (15-year). These aren't obscure line items — they're standard features of any rental property.

The key consideration for long-term rental investors is the passive activity loss rules. If your adjusted gross income is under $150K, you can deduct up to $25K in passive losses against ordinary income. Above that threshold, you'll need other passive income to absorb the deductions — or you can carry them forward to offset gains when you sell.

MACRS Depreciation Breakdown

Accelerated Depreciation by MACRS Class

$48,000 total reclassified into shorter recovery periods

5-Year Property $28,800

60%

7-Year Property $4,800

10%

15-Year Property $14,400

30%

Estimated Year-1 Tax Savings $17,760

Illustrative estimate. Final allocations vary based on property facts and report findings.

Method

Year-1 Deduction

Difference

Standard (27.5yr straight-line)

$8,727

—

With Cost Segregation + Bonus

$48,000

+$39,273

Estimated deduction based on typical cost segregation allocations for rental property properties. Actual study results may vary based on property-specific analysis including age, condition, renovations, and local construction costs.

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Why Cost Segregation Works for Rental Properties

Even unfurnished rental properties contain significant depreciable components that qualify for shorter MACRS recovery periods. Cabinetry, countertops, appliances, carpet and vinyl flooring, decorative lighting fixtures, and bathroom vanities are classified as 5-year property. Dedicated HVAC equipment, water heaters, and certain electrical systems fall into the 7-year class.

Land improvements make up the 15-year MACRS class: driveways, sidewalks, fencing, landscaping, irrigation systems, and exterior lighting. These are standard features of any rental property, yet under straight-line depreciation they would be spread over the full 27.5-year schedule.

With 100% bonus depreciation, the entire reclassified amount is deductible in year one. For long-term rental investors, the passive activity loss rules apply: deductions can offset passive rental income, and if your AGI is under $150K, up to $25K can offset ordinary income. Investors who qualify as Real Estate Professionals (750+ hours/year in real estate) can deduct without passive loss limitations.

Who This Example Applies To

Single-family rental property investors
Buy-and-hold landlords in any tax bracket above 24%
Portfolio investors looking to shelter rental income across multiple properties
Investors building toward Real Estate Professional status

Long-term rental depreciation is classified as passive. If your AGI exceeds $150K and you do not qualify as a Real Estate Professional, accelerated deductions carry forward as suspended passive losses until you generate passive income or sell the property. Actual results vary based on property age, condition, and local construction costs.

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Compare: Rental Property at Different Price Points

Price	Accelerated	Tax Savings	Study Cost	ROI
$300K	$48,000	$17,760	$795	22x
$500K	$80,000	$29,600	$795	37x
$750K	$120,000	$44,400	$795	56x
$400K	$64,000	$23,680	$795	30x
$600K	$96,000	$35,520	$795	45x
$1M	$160,000	$59,200	$1,195	50x
$250K	$40,000	$14,800	$795	19x
$550K	$88,000	$32,560	$795	41x
$900K	$144,000	$53,280	$795	67x
$1.2M	$192,000	$71,040	$1,195	59x
$1.5M	$240,000	$88,800	$1,195	74x

Compare: $300,000 Across Property Types

Property Type	Accelerated	Tax Savings	Study Cost	ROI
Airbnb / Short-Term Rental	$72,000	$26,640	$795	34x
Rental Property	$48,000	$17,760	$795	22x

Frequently Asked Questions

What is a cost segregation study? ▼

A cost segregation study is an engineering-based analysis that reclassifies components of your property into shorter IRS depreciation categories (5, 7, and 15 years) instead of the default 27.5 or 39 years. This accelerates your depreciation deductions, reducing your tax bill in the early years of ownership.

Can I use cost segregation deductions against my W-2 income? ▼

For long-term rentals, depreciation deductions are generally passive and can only offset passive income. However, there are two key exceptions: (1) if your AGI is under $150K, you can deduct up to $25K in passive losses against ordinary income, and (2) if you qualify as a Real Estate Professional (750+ hours/year in real estate), all rental income becomes non-passive. STR owners who materially participate can deduct against W-2 income regardless.

How long does a cost segregation study take? ▼

Our studies are delivered in 3-5 business days. You provide the property address, purchase price, and closing date — we handle everything else using assessor records, satellite imagery, and construction cost databases. No site visit or tenant disruption required.