Every building you own is depreciating on a 27.5- or 39-year schedule. A large piece of it — the fixtures, the flooring, the appliances, the site work — was never supposed to be on that schedule at all. If nobody ever separated it out, that deduction didn’t disappear. It’s still sitting in the building, and there is a way to take all of it in one year.
No amended returns required. Works on property you bought years ago.
The tax code depreciates a rental property as though it were one long-lived asset. It isn’t. Carpet, cabinets, appliances, specialty electrical, landscaping, driveways and fencing all have far shorter legal lives — five, seven, or fifteen years instead of 27.5. An engineering-based cost segregation study identifies and documents each of those components so they can be depreciated on the schedule they actually belong to.
On a typical residential property that reclassification commonly lands somewhere around 20–30% of the purchase price. With 100% bonus depreciation back in effect for property placed in service after January 19, 2025, the reclassified short-life property can be deducted in full, in year one, instead of spread across decades. [Matt confirms the current-year bonus figure before this is used with a client.]
This is the piece most owners have never been told, and it’s the reason this page exists.
The deduction was never lost. It was deferred by default, because nobody ever separated the building into its parts. The look-back is how you go get it.
Two inputs. No email needed. This is a rough order of magnitude — the feasibility check gets your actual number, in writing.
Use what you paid, including capitalized improvements. Land is backed out inside a real study — this estimate already assumes a typical land allocation.
*An educational ballpark, not tax advice. It assumes a typical land allocation, a 20–30% reclassification into short-life property, and that the short-life property is fully deductible in year one under current bonus-depreciation rules. Whether your property reclassifies at that rate — and whether those losses are usable against your income this year under the passive-loss rules — depends on facts a slider can’t see. That second question is the one that decides whether a study is worth running at all. “Could,” never “will.”
Cost segregation creates the deduction. It doesn’t decide whether you get to use it this year. Anyone selling you a study without raising this is selling you a study, not a strategy.
Rental losses are passive by default. At higher incomes the §469 rules can cap them near zero no matter how large the deduction is. Getting past that takes either short-term-rental treatment or Real Estate Professional Status — two different paths, two different sets of tests.
Below a certain purchase price an engineered study costs more than it returns. That’s a real answer, and you should have it before you pay for anything. It’s exactly what the feasibility check is for.
Accelerated depreciation is recaptured on sale, at up to 25% on the real-property portion. This is a timing trade, not a free lunch, and it’s worth modeling against your actual hold period. A 1031 exchange can defer it.
A study firm produces a report. It goes to a preparer who wasn’t involved, who now has to decide how to carry it, whether to file the 3115, and how to defend it later. That handoff is where the value quietly leaks out, or the risk quietly builds up.
Before anyone sells you a study, you should know whether your property is even a candidate — and whether you could use the deduction if you had it.
Bring the property address, roughly what you paid, and the year you placed it in service. You’ll leave knowing whether a look-back is worth running, roughly what it could be worth, and what it would cost. If it clears, the full written analysis is The Blueprint — $2,997, credited in full when you proceed.
Book the feasibility check →Yes, and it’s the most common version of this work. A look-back study on a property placed in service in an earlier year is applied by filing Form 3115, a change in accounting method, which takes the entire cumulative missed depreciation as a single catch-up adjustment in the current year. You don’t amend prior returns to do it.
Engineered studies on residential and small multifamily property generally run in the $5,000 to $15,000 range depending on size and complexity, and the study is itself deductible. The real question isn’t the fee, it’s whether your property carries enough reclassifiable basis to clear it — which is what the free feasibility check answers before you commit to anything.
An engineering-based study that follows the IRS Audit Techniques Guide methodology is a well-established, IRS-recognized procedure, not an aggressive position. What actually draws scrutiny is a study performed without engineering support, or one whose conclusions were never carried onto the return correctly. That’s the argument for having the same person order it and file it.
That’s the right question, and often the deciding one. Rental losses are passive by default and can be capped near zero at higher incomes. Getting past the cap requires either short-term-rental treatment or Real Estate Professional Status, each with its own tests. We check this before recommending a study, because a deduction you can’t use this year is worth far less than the study costs.
Accelerated depreciation is recaptured on sale, at up to 25% on the real-property portion. Cost segregation is a timing strategy — it moves deductions forward, it doesn’t erase the eventual tax. Whether the trade is worth it depends on your hold period, your bracket now versus later, and whether you plan to exchange rather than sell outright.
No — the opposite. The best time to plan a study is before you close, while the purchase-price allocation, the improvement scope, and the in-service date can all still be sequenced to work in your favor. After closing you’re working with whatever you ended up with.
Bring the address, what you paid, and the year you placed it in service. You’ll get a straight answer on whether a look-back is worth running — including “not on this one.”
Book the feasibility check →