Los Angeles, CA · $280K
New-build ADU rented as STR
Year-1 federal benefit
$7,500
ADU (Accessory Dwelling Unit)
ADU cost segregation: $8K–$39K Year-1 deductions.
ADUs are small but expensive per square foot — modern finishes, full kitchen, full bath, often premium MEP. The reclassification percentage is high; the benefit just scales with size.
The 30-second answer
ADU (accessory dwelling unit) cost segregation is an engineering-based study that reclassifies a backyard or accessory rental unit's components out of the default 27.5-year residential schedule into faster 5- and 15-year MACRS classes. An ADU reclassifies at a high percentage — typically 7–14% of basis — because it is small but expensive per square foot, packing a full kitchen, full bath, modern finishes, and often premium MEP into a compact footprint; the benefit simply scales with the unit's size. If the ADU is part of your primary residence, only the rental-use portion is depreciable, allocated by square footage. An ADU rented as a short-term rental where you materially participate can offset active income; a long-term ADU rental loss is passive under IRC §469.
ADU cost segregation reclassifies 7–14% of depreciable basis from the 27.5- or 39-year shell into 5-, 7-, and 15-year MACRS classes per 26 U.S.C. § 168 and Rev. Proc. 87-56. Under OBBBA's permanent 100% bonus depreciation (placed-in-service 2025+), reclassified components are deductible in year one. All credible cost-seg providers use the same federal framework — industry-standard 2026 construction cost data, MACRS classification, IRS Audit Techniques Guide (Pub 5653) compliance. What differs across property types is land-allocation share, FF&E weight, and material-participation eligibility under §469. For the general explanation, see what a cost segregation study is and what the report contains.
| Property type | Reclass to 5/7/15-yr | Year-1 federal benefit | Study cost |
|---|---|---|---|
| STR | 19–39% | $45K–$280K | From $495 |
| SFR | 8–32% | $16K–$165K | From $495 |
| Condo | 10–19% | $18K–$76K | From $495 |
| Brownstone | 5–20% | $60K–$640K | From $495 |
| Rowhouse | 5–18% | $10K–$170K | From $495 |
| Duplex | 8–21% | $19K–$105K | From $995 |
| Fourplex | 14–29% | $56K–$230K | From $995 |
| Office | 16–29% | $84K–$650K | From $995 |
| Retail | 20–37% | $90K–$690K | From $995 |
| Industrial | 15–28% | $78K–$840K | From $2,495 |
| Self-storage | 19–36% | $140K–$1.6M | From $2,495 |
| Medical office | 16–29% | $84K–$540K | From $2,995 |
| Mixed-use | 12–23% | $63K–$515K | From $995 |
| Multifamily | 14–28% | $44K–$200K | From $995 |
| Multifamily 5+ | 14–26% | $110K–$1.0M | From $1,995 |
| Triplex | 8–26% | $25K–$165K | From $995 |
| Restaurant | 16–29% | $72K–$430K | From $2,995 |
| Vet | 19–36% | $85K–$540K | From $2,995 |
| Gym | 21–40% | $110K–$900K | From $2,995 |
| Dealership | 25–47% | $465K–$4.2M | From $2,995 |
| ADU this page | 7–14% | $8K–$39K | From $495 |
| Commercial | 18–34% | $94K–$765K | From $995 |
| Data center | 43–65% | $2.5M–$29M | $4,995–$54,995 (sub-$100M); $100M+ by proposal |
| Senior living | 21–39% | $315K–$2.3M | By proposal |
| Funeral homes | 18–30% | $135K–$900K | By proposal |
| Child day care | 15–28% | $56K–$630K | From $2,995 |
| Adult day care | 14–26% | $78K–$780K | From $2,995 |
| Church | 10–22% | $37K–$825K | From $2,995 |
| Farm | 8–65%† | $19K–$780K | From $995 |
Reclassification ranges from the bands we publish per property type (measured on our delivered studies where we have enough of a type, modeled elsewhere); Year-1 federal benefit assumes 37% bracket and full first-year usability. Study costs are Cost Seg Smart pricing — comparable engineering studies elsewhere range $5,000–$15,000+. The ADU figure is an ADU acquired with a house; one the owner built or converted is priced on its documented construction cost, from $995. See full provider comparison.
† Farm: the figure is property with a recovery period of 20 years or less, on a farm with one or more rental houses on it. It counts 10- and 20-year property, which no other row has, and its dollar figure is a first-year deduction, not tax saved. A farm is quoted from a list of what is on it; see how.
Worked examples · modeled
What adu cost seg looks like in practice.
Illustrative, modeled properties, not client engagements. Estimates assume 37% federal bracket and full first-year usability of the loss (active income offset or REPS). Your actual benefit varies with bracket, basis allocation, and CPA's treatment.
Good fit when…
- ✓Newly-built ADUs (the depreciable basis is well-documented)
- ✓ADUs rented as STR — material participation may apply
Skip it when…
- ×Owner-built ADUs under about $125K of documented cost — on the renovation ladder the fee starts eating the benefit
- ×An ADU built mostly with your own labor and few receipts — uncompensated labor is not basis, so there may be less to study than the build looks worth
Estimate
Run the numbers on your adu.
Pre-set to ADU defaults — adjust price + bracket to match your property.
Estimated Year-1 tax savings · Click to order →
$21,796
on $58,909 of accelerated deductions (Year 1, beyond straight-line)
typical $11,625–$46,499
Want this in writing for your CPA? Get a 1-page analysis →5-yr15-yr27.5/39-yr
Study cost
$895
ROI on study
24×
Delivery
1–2 business days
Your study includes more than the report.
- Engineering-based, property-specific analysis
- Direct coordination with your CPA
- Free revisions for 12 months; corrections of our errors always free
- Renovation analysis under $100,000 included
- Lifetime written audit support
- CPA-ready depreciation schedules and Excel fixed-asset file
Everything included in your study fee. Form 3115 preparation available separately.
Estimate based on industry-standard 2026 construction cost data and IRC §168(k). Your actual result varies with property age, condition, and basis allocation.
Frequently asked
ADU cost segregation, by question.
Do ADUs qualify for cost segregation?
Yes, and they reclassify at a high percentage — typically 7–14% of basis — because an ADU packs a full kitchen, bath, finishes, and premium MEP into a small, expensive-per-square-foot footprint. The benefit scales with the unit's size, so a newly built ADU with well-documented basis is the strongest case.
My ADU is attached to my home — can I still cost-segregate it?
Yes, but only the rental-use portion is depreciable. The study allocates basis between your personal residence and the rented ADU by square footage, then cost-segregates only the rental portion. If you rent it as a short-term rental and materially participate, the deduction can offset active income.
How much does an ADU cost segregation study cost?
It depends on how the ADU's basis is established. An ADU you built or converted yourself is priced on its documented build cost, on the renovation and improvement ladder: $995 up to $100K, $1,295 from $100K to $250K, $1,495 from $250K to $500K. An ADU that came with a house, where basis is allocated by square footage, is priced with single-family rentals: from $495 for a sub-$300K allocated basis and $895 for $300K–$700K. Either way it is a CPA-ready PDF, within 1–2 business days.
Regulation references
The rules that govern adu cost segregation.
- ADU Cost Segregation: What Counts as Basis When You Built It Yourself (2026) — our in-depth guide to adu cost segregation.
- Real estate professional status (REPS) — the 750-hour and 51% tests under 26 U.S.C. § 469(c)(7), and the seven material participation tests under Treas. Reg. § 1.469-5T. Required to offset W-2 income with long-term rental losses unless the property qualifies under the STR loophole.
- Form 3115 (catch-up depreciation) — how to apply cost segregation to a property placed in service in a prior year. Full § 481(a) catch-up adjustment, automatic change-number 7, no IRS user fee.
- Treas. Reg. § 1.469-1T — full reference — all six (A)–(F) exceptions that reclassify a rental as non-rental for passive activity loss purposes.
- Regulations hub — full canonical reference for all cost segregation regulations.
- irsdepreciationrules.com — companion plain-language reference for the underlying IRS depreciation statutes (operated by Cost Seg Smart).
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