Cost Segregation: When It's Worth It For Small Real Estate Investors

Cost segregation studies aren't just for syndicators. Here's the breakeven point for a single rental.

Cost segregation reclassifies portions of a building from 27.5/39-year depreciation to 5, 7, and 15-year property. The result: massive deductions in the first year of ownership.

For a $400K rental property, a typical study identifies $60K–$90K of accelerated depreciation. At a 32% marginal rate, that's $20K–$30K of first-year tax savings.

Studies cost $2,500–$6,000. The breakeven is usually around $250K of building basis — below that, the math gets thin.

Bonus depreciation for 2026 sits at 40%. Plan timing accordingly — phasing-out bonus changes the calculation each year.