Cost Segregation on a $500K Condo: $68,000 in Accelerated Depreciation

Condo investors often assume cost segregation doesn't apply to them. It does — and the results may surprise you.

$68,000 Accelerated Depreciation

$25,160 Est. Year-1 Tax Savings

32x Return on Study Cost

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Property Type

Purchase Price

$25,160

Estimated Year-1 Tax Savings

$68,000

Accelerated Deductions

$795

Study Cost

32x

ROI on Study

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Estimates are for illustration only. Details

What This Means for a $500,000 Condo

$500,000 Condo property — cost segregation depreciation example

A $500K condo generates approximately $68K in accelerated depreciation through cost segregation. While condos have a slightly lower accelerated share than single-family homes (because you own less of the building structure), the interior components you own outright — flooring, cabinetry, fixtures, appliances, built-ins — all qualify for shorter MACRS classes.

Many condo investors overlook cost segregation because they assume the HOA covers building depreciation. It doesn't work that way. Your condo's depreciable basis includes your allocated share of the building's structural and mechanical systems, plus 100% of your unit's interior buildout. Cabinets, countertops, bathroom fixtures, closet systems, lighting, flooring, and appliances are all 5-year personal property. In-unit HVAC equipment, water heaters, and dedicated electrical circuits qualify as 7-year property.

For condo STR investors in markets like Miami, San Diego, or Honolulu, the benefit is even higher because furnished condos carry substantial FF&E. The furniture package alone — beds, sofas, dining sets, linens, kitchenware, electronics — can represent 10-15% of the purchase price, all reclassifiable to the 5-year class.

MACRS Depreciation Breakdown

Accelerated Depreciation by MACRS Class

$68,000 total reclassified into shorter recovery periods

5-Year Property $44,200

65%

7-Year Property $10,200

15%

15-Year Property $13,600

20%

Estimated Year-1 Tax Savings $25,160

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

Method

Year-1 Deduction

Difference

Standard (27.5yr straight-line)

$14,545

—

With Cost Segregation + Bonus

$68,000

+$53,455

Estimated deduction based on typical cost segregation allocations for condo 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 Condos

Condo owners often overlook cost segregation, assuming the HOA handles all building depreciation. That is not correct. Your condo's depreciable basis includes your allocated share of the building's structural and mechanical systems, plus 100% of your unit's interior buildout. Cabinets, countertops, bathroom fixtures, closet systems, lighting, flooring, and appliances all qualify as 5-year personal property under MACRS.

In-unit HVAC equipment, water heaters, and dedicated electrical circuits fall into the 7-year class. Your allocated share of common-area building systems — elevators, fire suppression, parking structures — may also contribute to shorter recovery classes depending on the building's configuration.

For condo STR investors, the benefit is amplified by furnishing packages. Beds, sofas, dining sets, linens, kitchenware, electronics, and decorative items all qualify as 5-year property. With 100% bonus depreciation, the entire reclassified amount is deductible in year one.

Who This Example Applies To

Condo or townhome investors (rental or STR use)
Investors who own individual units within larger buildings
Furnished condo STR operators in resort or urban markets
Investors in the 24-37% federal bracket

Condo cost segregation applies to your unit's allocated basis, not the entire building. Results depend on the building's construction type, your unit's interior finish level, and whether the property is furnished. Land allocation for condos is typically lower than single-family homes.

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Compare: Condo at Different Price Points

Price	Accelerated	Tax Savings	Study Cost	ROI
$500K	$68,000	$25,160	$795	32x
$850K	$115,600	$42,772	$795	54x

Compare: $500,000 Across Property Types

Property Type	Accelerated	Tax Savings	Study Cost	ROI
Airbnb / Short-Term Rental	$120,000	$44,400	$795	56x
Rental Property	$80,000	$29,600	$795	37x
Duplex	$88,000	$32,560	$995	33x
Condo	$68,000	$25,160	$795	32x
Triplex	$88,000	$32,560	$995	33x

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.

Does cost segregation work for Miami condos used as Airbnbs? ▼

Absolutely. Cost segregation applies to your condo unit's allocated share of the building's depreciable components, plus your unit's individual buildout (flooring, fixtures, cabinetry, appliances). Many Miami condo STR investors overlook this, assuming standard depreciation captures everything. It doesn't — a proper study identifies significantly more in reclassifiable components.

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.