Bonus depreciation - cost segregation study?

Fort Wayne, Indiana
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Bonus depreciation - cost segregation study?

Gary Tucci
Member since 2025 · 10 posts · 4 votes

Anyone have any experience or insight into doing a cost segregation study? Seems like a lot of money to get one but our STR in Indiana was placed in service spring of 2025 and pretty sure it qualifies as non passive. The tax savings of bonus depreciation seem to significant to NOT consider a cost segregation study!! I appreciate any and all feedback.

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Patrick Deering
Member since 2022 · 6 posts · 3 votes
10mo

I spent $2k on a cost seg for a STR this year. It netted $54k in depreciation. I used CSSI and the process was pretty painless.
There are also some DIY options out there. That option was ~$600, but it was my first cost seg so I opted to pay a little more to make sure it got done correctly. 

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  • Trent Reeve
    Atlanta · Member since 2022 · 710 posts · 640 votes
    10mo

    they arent that expensive. well worth looking into

    0Reply
  • Patrick Deering
    Member since 2022 · 6 posts · 3 votes
    10mo

    I spent $2k on a cost seg for a STR this year. It netted $54k in depreciation. I used CSSI and the process was pretty painless.
    There are also some DIY options out there. That option was ~$600, but it was my first cost seg so I opted to pay a little more to make sure it got done correctly. 

    2Reply
  • Andrew Street
    Member since 2019 · 1k+ posts · 292 votes
    10mo

    I've worked with a few STR owners on this. A cost segregation study basically separates your property into components that can be depreciated faster than the standard 27.5-year schedule. For STRs placed in service in 2025, bonus depreciation can apply immediately to some components, which can give pretty significant upfront tax savings.

    The study can cost a few thousand, but for higher-value properties or ones with renovations/furnishings, the deductions usually outweigh the cost quickly. Key is using a reputable engineer/accounting firm experienced with rental properties to make sure it’s IRS-proof.

    In my experience, if your property qualifies and you want to reduce taxable income early, it’s almost always worth considering.

    2Reply
  • Andrew SteffensBusiness Member
    Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
    10mo

    I have a great nationwide company I use, they charge $2500-3500.  That is a drop in the bucket to get potentially tens of thousands in tax benefit.  Send me a DM if you want me to get you in touch with my company.

    [email protected]813-563-0877
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  • Krishnan Iyer
    Investor · Member since 2023 · 46 posts · 34 votes
    10mo

    I used diycostseg.com … one of the best and they also provide audit defense. About $500. 

    1Reply
    • Gary Tucci
      OP
      Member since 2025 · 10 posts · 4 votes
      10mo

      @Krishnan Iyer thx for your input, I'll check it out 

      0Reply
    • Jules Aton
      MD/DC · Member since 2024 · 1k+ posts · 1k+ votes
      9mo
      Quote from @Krishnan Iyer:

      I used diycostseg.com … one of the best and they also provide audit defense. About $500. 


       Anyone else with insight on diycostseg.com? 

      0Reply
  • Henry ClarkPro Member
    Developer · Member since 2020 · 4k+ posts · 4k+ votes
    10mo

    OP. Don't know your depth of research on early depreciation.  

    Is it worth it?
    1.    Can you take the deductions?  Do you or your spouse have REP status?

    2.  The study doesn’t include the land cost.  How much is your rental unit worth excluding land?  Let’s say $500,000.   And 1/4 of that qualifies.  Say $125,000 At average 25% tax.  Say $30k tax reduction.  That is a good amount.  But it isn’t a savings.  It’s a timing difference. We do and treat like a loan.  The cost of the study is an expense.

    3.  Do you plan to sale in the next 3 to 7 years?  Then you need to plan to pay back a large portion of those deductions.  

    Understand your eligibility and your situation before doing the study.  

    2Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    10mo
    Quote from @Gary Tucci:

    Anyone have any experience or insight into doing a cost segregation study? Seems like a lot of money to get one but our STR in Indiana was placed in service spring of 2025 and pretty sure it qualifies as non passive. The tax savings of bonus depreciation seem to significant to NOT consider a cost segregation study!! I appreciate any and all feedback.


    Was it also purchased this year? The OBBB for full depreciation requires purchase and service this year. Cost segregation companies will do an estimate of cost and savings. I recommend you get an estimate of cost and savings if you or spouse qualify as a REP or Dan use STR loophole (terrible name, but common name). Note you do not qualify for STR loophole if you use a PM or co-host that does most of the work (your time spent on the STR must exceed all other persons (must be more than any other person) If you or spouse do not qualify as rep or for the STR loophole, there is no reason to look into bonus depreciation.

    Good luck  

    1Reply
    • Gary Tucci
      OP
      Member since 2025 · 10 posts · 4 votes
      10mo

      @Dan H. Thanks, it was purchased late last year and put into service this year.  The avg length of stay was 4 days and we spent ~200 hrs preparing the house to rent and managing numerous platforms and guests throughout the year.

      0Reply
    • Dan H.Pro Member
      Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
      10mo
      Quote from @Gary Tucci:

      @Dan H. Thanks, it was purchased late last year and put into service this year.  The avg length of stay was 4 days and we spent ~200 hrs preparing the house to rent and managing numerous platforms and guests throughout the year.

      Consult your own tax experts, I am not a tax professional.   I am a RE investor with experience doing bonus depreciation on some of our properties.

       You realize purchased last year means it does not meet the conditions in the OBBB for 100% bonus depreciation?

      I suspect your STR participation would qualify you for the STR loophole. The 2024 bonus depreciation was 40% versus the 100% if it qualified under OBBB.

      I recommend: 1) get a projected cost and projected savings from a cost segregation specialist.  2) get with your tax professional to calculate projected scenarios and if the savings justifies the cost.

      unfortunately there is a large difference between 40% bonus depreciation and 100% bonus depreciation.   That could be the difference between bonus depreciation being a smart move and it not being a smart move.  

      good luck

      1Reply
  • Reyjie Sobebe
    Member since 2025 · 29 posts · 7 votes
    10mo

    A cost seg can definitely be worth it, but it really depends on the size of the property and how much accelerated depreciation you can realistically unlock. For STRs that qualify as non-passive, the impact is even bigger because those losses can offset your W-2 or business income. The main thing I look at is the cost vs. projected tax savings most firms will give you a free estimate so you can see the numbers before committing.

    Also, make sure your material participation is airtight. I’ve found that keeping a simple, daily log makes things a lot easier if you’re ever questioned.

    1Reply
  • Bill HamptonBusiness Member
    Accredited Investment Fiduciary, AIF®, Financial Planner, Tax Strategist, Real Estate Investor · Atlanta, GA · Member since 2012 · 2k+ posts · 977 votes
    10mo

    @Gary Tucci

    Yes, as previously stated a cost segregation study is a great tax savings strategy if you meet the requirements. Consult with your accountant to determine how much you would benefit from a cost segregation study. 

    Happy to discuss if you have any questions. 

    404-482-3170
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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    10mo

    @Gary Tucci,

    A cost segregation study can definitely be worth the investment, especially with 100% bonus depreciation.

    Since your short-term rental (STR) is likely non-passive due to your material participation, the bonus depreciation can offset other income, including W-2 income. The upfront cost of the study may seem high, but the tax savings often outweigh it. Have you had your CPA run the numbers?

    Good luck, and feel free to reach out if you need more insights!

    [email protected]941-914-7779
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  • Aaron ZimmermanBusiness Member
    Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
    10mo

    I'd say general cost is $2-3k for the cost seg. I'd recommend discussing your tax situation with your cpa prior to pulling the trigger so you know you can actually get benefit from doing the cost seg 

    [email protected]
    Brick House CPAs53 Reviews
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    0Reply
  • Costin I.
    Rental Property Investor · Round Rock, TX · Member since 2016 · 1k+ posts · 971 votes
    10mo

    @Gary Tucci - study this diagram to find answers to your questions and questions you have yet to think about

    1Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    9mo

    Have a conversation with your accountant to see if you would benefit through the added depreciation / loss.

    If you are, run a scenario regarding what the total loss would be along with what the tax savings would be in your situation.

    Many cost segregation firms will provide a estimate of what the results would be.

    Best of luck!

    [email protected]917-280-8544
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  • Sagiv O.
    Real Estate Investor · Austin, TX · Member since 2017 · 85 posts · 19 votes
    9mo

    For an Indiana STR placed in service spring 2025, cost seg could definitely be worthwhile if you're confident about the material participation. The sweet spot is having significant W-2 income to offset - sounds like that's your situation.

    Quick math: typical STR might reclassify 25-30% of the building basis into 5 and 15-year property. With 100% bonus depreciation available for 2025, you'd take all of that upfront. On a $400k property with 20% land, that's roughly $80-100k in accelerated depreciation. At higher tax brackets, that's real money.

    Two things to watch: 1) Make sure you can document 100+ hours AND substantial involvement for material participation - the IRS is looking at STR claims more carefully now, and 2) Get quotes from a few firms. Costs vary widely, and for a single property you want someone who's done Indiana STRs before and knows the local nuances.

    If you're planning to hold long-term and this is your only major deduction, it usually makes sense.

    0Reply
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