In one paragraph
Every property type uses the same federal cost segregation framework — industry-standard 2026 construction cost data, MACRS classification per Rev. Proc. 87-56, IRS Cost Segregation Audit Techniques Guide (Pub 5653) compliance, depreciation under 26 U.S.C. § 168. What varies across property types is (1) the reclassification ratio (FF&E weight, land-improvement share), (2) material-participation eligibility under §469, and (3) study cost tier. Furnished short-term rentals reclassify the most (25–32%) thanks to FF&E density; bare single-family rentals reclassify the least (18–22%); multifamily and commercial sit between based on use-type and finish quality. Under OBBBA's permanent 100% bonus depreciation for property placed in service 2025+, every reclassified component is deductible in year one regardless of property type.
Property type comparison: reclass %, Year-1 benefit, study cost
| Property type | Reclass to 5/7/15-yr | Year-1 federal benefit | Study cost | Best fit when |
|---|---|---|---|---|
| Short-term rental (STR) | 25–32% | $20K–$80K | from $495 | Furnished, materially participates, has W-2 to offset |
| Single-family rental (SFR) | 18–22% | $10K–$45K | $495–$1,495 | REPS qualifier or has passive income to offset |
| Condo | 14–18% | $8K–$35K | $495–$1,495 | HOA-shared structures reduce reclass; STR-converted condos do better |
| Duplex / 2–4 unit | 17–20% | $15K–$60K | from $795 | House-hacker living in one unit gets prorated benefit on rental side |
| Multifamily 5+ | 17–22% | $50K–$300K+ | from $1,995 | Syndicators and active investors with substantial passive income |
| Commercial | 20–33% | $80K–$500K+ | from $1,995 | Office, retail, restaurant, industrial, medical, mixed-use |
Reclassification ranges are internal benchmarks across 4,000+ studies. Year-1 benefit assumes 37% federal bracket and full first-year usability of the loss (active income offset or REPS). Study costs are Cost Seg Smart pricing; comparable engineering studies elsewhere range $5,000–$15,000+ — see provider comparison.
Why the reclassification ratio varies by property type
Three structural factors drive most of the variance across property types:
- FF&E weight (furniture, fixtures, equipment). Furnished STRs and hospitality carry significant 5-year FF&E density — beds, sofas, appliances, smart TVs, decor, outdoor kitchens. This material is buried in the 27.5-year shell by default; a study identifies it separately. Bare long-term rentals carry minimal FF&E and reclassify lower as a result.
- Land-improvement share (15-year property). Site work — driveways, parking lots, landscaping, fencing, exterior lighting, signage — qualifies as 15-year property under MACRS class 00.3 per Rev. Proc. 87-56. Commercial properties on larger lots benefit more; condos with shared HOA-owned exterior benefit less.
- Component finish quality (5- and 7-year property). Carpet, removable wall coverings, decorative lighting, and certain millwork classify as 5- or 7-year personal property when properly documented. Class A finishes shift more value into shorter-life buckets than Class C bare-bones rentals.
Material participation eligibility differs by property type
Cost segregation creates a Year-1 deduction; whether you can use that deduction against W-2 or active business income depends on whether you materially participate in the activity, governed by IRC §469 and Treas. Reg. §1.469-5T.
- Short-term rentals (average guest stay ≤7 days) are not classified as rental real estate under §469 — they're a non-rental trade or business. Owners need to clear material participation (typically the 100-hour test, more than anyone else) — not the much harder Real Estate Professional Status (REPS).
- Long-term rentals are passive by default. Loss usability requires REPS (750+ hours per year, more than 50% of personal services in real estate) — usually only achievable by a full-time real estate spouse.
- Commercial property leased to an active business may qualify for active loss treatment under self-rental rules. Self-rental income from material participation in the operating business gets active treatment; losses do not without grouping elections.
Confirm material participation with your CPA before assuming you can use a Year-1 cost-seg loss against active income.
Bonus depreciation is the same for every property type
Under the One Big Beautiful Bill Act (OBBBA, signed July 2025), bonus depreciation under 26 U.S.C. § 168(k) is permanently 100% for property placed in service after January 19, 2025. Every 5-, 7-, and 15-year component identified by a cost segregation study can be fully expensed in year one, regardless of property type. Pre-2025 placed-in-service properties followed the TCJA phase-down (80% in 2023, 60% in 2024) and may benefit from a Form 3115 §481(a) lookback to capture missed depreciation in the current tax year — the lookback play works for every property type.
Next steps
Pick the property type that matches yours for a deeper walkthrough — each spoke includes worked examples, fit checklist, and a property-specific calculator:
- Short-term rental (STR / Airbnb / VRBO)
- Single-family rental
- Condo
- Duplex / triplex / fourplex
- Multifamily 5+
- Commercial (office, retail, restaurant, industrial, medical, mixed-use)
For provider-by-provider comparison rather than property-by-property, see /compare/. For pricing across providers, see our companion costsegregationpricing.com. For methodology details, see /methodology/.
Last reviewed: May 2026. Maintained by the Cost Seg Smart Editorial Team. Reclassification ranges from 4,000+ Cost Seg Smart studies; verify your specific numbers with the free calculator.