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In a cost segregation short term rental study your purchase price is split into the parts that depreciate fast and the part that does not. On a short term rental the difference in year one is worth having, provided the deduction is one you can use. We check that first.
An engineering based study with the documentation an examiner expects to see
Feasibility checked before you commission anything
The study and the tax return prepared by the same firm, so the schedule matches the report
A study only helps if you can use the deduction this year, and on a short term rental that depends on your average guest stay and your hours.
You do not have to have bought this year. A property you have owned for several years can be caught up in one filing, without amending old returns.
Accelerated depreciation is timing: the deduction is recaptured on sale, so a projection has two halves.
In a cost segregation short term rental study the components of a building are reclassified out of one long recovery period into several shorter ones. The appliances, carpet, fixtures, cabinetry and land improvements are separated from the structure and written off over 5 or 15 years; the structure stays on 27.5 or 39.
The IRS publishes a Cost Segregation Audit Techniques Guide setting out what its examiners look for in a study, and we build to it.
A study splits one purchase price into assets that depreciate at different speeds. Widths are illustrative; the split for your property comes from the engineering.
Appliances, carpet, fixtures, furniture
Land improvements, drive, deck, fence
The building structure itself, which is the bulk of the basis
This is engineering and tax work. We do not appraise property, and what you paid and what the property is worth are unchanged by a study.
150,000+ returns prepared and filed
CPAs and Enrolled Agents on every return
A fixed quote agreed before work starts
What is found depends on the building type.
a house or cabin let nightly, where furniture, appliances and outdoor improvements are a meaningful share of what was bought.
a property bought as a residence and moved into nightly letting, where the placed in service date and the basis both need settling first.
where less of the basis is in land improvements and the study depends on the interior finish.
where the study, the entity return and the owners' personal returns all have to agree.
where the catch up is the reason for the study and no current year purchase price is involved.
purchase price, placed in service date and your own tax position. If the deduction cannot be used this year we say so before you pay for anything.
closing statement, blueprints, invoices and a site review, with each component costed and assigned a recovery period.
a written study with the methodology and the reconciliation to actual cost that an examiner would ask for.
a new depreciation schedule for a current year purchase, or Form 3115 with a catch up adjustment where you have owned the property for a while.
We tell owners not to commission a study when:
The deduction is not usable this year. If the activity is passive and there is no passive income to absorb it, the loss is suspended and the outcome is a bigger suspended loss.
The basis is too small for the fee to be justified.
A sale is close, so the depreciation is recaptured soon after it is taken.
The building is nearly all structure, with very little in short life components.
The first is decided by the average guest stay and your hours.
Send the closing statement, the date it went into service, and a note on how the property is let. That is enough to tell you whether a study is worth commissioning.
Quoted against the property and the work it needs, not against your tax saving. What we price on:
These are the factors, not a quote.
"This is the 6th year I have worked with Dimov Tax Specialists… I always feel confident in my final returns which include out of state rental properties."
Our team includes CPAs and Enrolled Agents who work on individual returns, business taxes and tax planning. Tell us what you need help with when you get in touch.
Send the property details and we will tell you whether a study pays, what it costs, and which year it belongs to.
General information rather than advice for your circumstances. Outcomes depend on facts specific to you, so speak to a CPA before acting on it.
