Question

What is a cost segregation study and how does it work?

Answer

A cost segregation study is an engineering-based analysis that separates a rental property into its components, such as appliances, flooring, cabinetry, and landscaping, and moves them from the standard 27.5-year depreciation schedule into shorter five-, seven-, and 15-year recovery periods. Deductions arrive earlier, when they may be worth more. One caveat matters for converted homes: The 100% bonus depreciation restored by the One Big Beautiful Bill Act generally applies only to property acquired after Jan. 19, 2025, so the existing components of a home you bought years ago usually don’t qualify for it.

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