Cost Segregation on a $350K Duplex: $61,600 in Accelerated Depreciation

A $350K duplex benefits from having two complete unit buildouts, which increases the share of reclassifiable personal property relative to a single-family home at the same price.

$61,600 Accelerated Depreciation

$22,792 Est. Year-1 Tax Savings

23x Return on Study Cost

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Property Type

Purchase Price

$22,792

Estimated Year-1 Tax Savings

$61,600

Accelerated Deductions

$995

Study Cost

23x

ROI on Study

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Estimates are for illustration only. Details

What This Means for a $350,000 Duplex

$350,000 Duplex property — cost segregation depreciation example

A duplex at $350,000 has an estimated depreciable basis of $280,000 (80% of purchase price, with 20% allocated to land). Each unit contains its own kitchen cabinets, countertops, appliances, bathroom fixtures, flooring, and lighting — doubling the 5-year personal property inventory compared to a single-family rental. Cost segregation reclassifies $61,600 of this basis into accelerated MACRS classes.

Under 100% bonus depreciation (permanently restored for 2025 and beyond), the full $61,600 is deductible in year one. At a 37% federal rate, that generates $22,792 in tax savings. The study costs $995 for a duplex, producing a 23x return on investment. Actual results depend on the property's age, condition, and construction type.

Duplexes depreciate on the 27.5-year residential schedule regardless of whether one or both units are rented. For house-hackers living in one unit, the full property basis remains depreciable. The passive activity loss rules still govern how the deductions are used — rental income is passive unless you qualify as a Real Estate Professional under IRC Section 469.

MACRS Depreciation Breakdown

Accelerated Depreciation by MACRS Class

$61,600 total reclassified into shorter recovery periods

5-Year Property $33,880

55%

7-Year Property $6,160

10%

15-Year Property $21,560

35%

Estimated Year-1 Tax Savings $22,792

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

Method

Year-1 Deduction

Difference

Standard (27.5yr straight-line)

$10,182

—

With Cost Segregation + Bonus

$61,600

+$51,418

Estimated deduction based on typical cost segregation allocations for duplex 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 Duplexes

Duplexes contain two complete sets of kitchens, bathrooms, appliances, and fixtures — effectively doubling the personal property inventory compared to a single-family rental at the same price point. Each unit contributes its own cabinetry, countertops, flooring, lighting, and bathroom fixtures to the 5-year MACRS class.

Shared building systems like HVAC units, water heaters, and electrical panels that serve both units qualify as 7-year property. Common-area improvements and site work — driveways, walkways, fencing, landscaping — fall into the 15-year class. The combination of per-unit and shared components creates a rich reclassification profile.

For house-hackers who live in one unit and rent the other, cost segregation applies to the entire property basis — not just the rented portion. The IRS allows depreciation on the full property as long as at least one unit is placed in service as a rental.

Who This Example Applies To

Duplex investors (owner-occupied or fully rented)
House-hackers living in one unit while renting the other
Investors in the 24-37% federal bracket
Properties with standard residential finishes in both units

Passive activity loss rules apply to long-term rental duplexes unless you qualify as a Real Estate Professional. Results vary based on property age, unit finish quality, and local construction costs.

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Compare: Duplex at Different Price Points

Price	Accelerated	Tax Savings	Study Cost	ROI
$500K	$88,000	$32,560	$995	33x
$350K	$61,600	$22,792	$995	23x

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.

Why are duplexes especially good for cost segregation? ▼

Duplexes contain two complete sets of kitchens, bathrooms, appliances, and fixtures — doubling the personal property inventory compared to a single-family home at the same price. This means a higher percentage of the property's depreciable basis falls into accelerated MACRS classes. The IRS allows depreciation on the entire property as long as at least one unit is rented.

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.