The Triple-Decker: New England's Perfect Cost Seg Candidate
Boston's triple-decker is the quintessential New England investment property. Three stacked units, each with its own kitchen, bathroom, and living space, typically built between 1890 and 1930. Neighborhoods like Dorchester, Somerville, Revere, and Brockton are defined by these buildings. And from a cost segregation perspective, they're close to ideal: three sets of kitchens, three sets of bathrooms, three sets of fixtures, flooring, and appliances—all reclassifiable to shorter depreciation schedules.
The median triple-decker in Greater Boston sells for $800,000-$1,200,000 depending on condition and neighborhood. In Somerville and Cambridge, prices push past $1.5M. That's a substantial depreciable basis, and if you're using straight-line depreciation over 27.5 years, you're spreading those deductions across nearly three decades instead of front-loading them.
A cost segregation study changes the timeline. With 100% bonus depreciation permanently restored under the One Big Beautiful Bill Act, all reclassified components—5-year, 7-year, and 15-year property—can be deducted in full in Year 1.
Massachusetts's 5% Flat Tax: State Conformity Matters
Massachusetts charges a flat 5% income tax (9% on short-term capital gains). The state generally conforms to federal depreciation rules, including Section 168(k) bonus depreciation. That means accelerated depreciation from a cost seg study reduces both your federal and Massachusetts state tax liability.
For a Boston investor in the 37% federal bracket, the combined rate is approximately 42%. Every $100,000 in accelerated depreciation saves roughly $42,000 in combined taxes. Additionally, Massachusetts recently implemented a 4% surtax on income over $1 million—bringing the effective state rate to 9% for high earners. For those investors, the combined rate approaches 46%, making cost segregation even more impactful.
Massachusetts's "millionaire's tax" (4% surtax on income over $1M) means high-earning Boston investors face up to 46% combined rates. Every dollar of accelerated depreciation is worth almost $0.46 in tax savings.
A Real Example: Triple-Decker in Dorchester
The property: A three-unit triple-decker in Dorchester (02124), purchased in May 2023 for $975,000. Built in 1915, renovated kitchens and bathrooms in 2021. Units rent at $2,400, $2,200, and $2,100/month. The owner is a physician at Mass General with W-2 income of $380,000.
Without cost segregation: Depreciable basis (after 15% land for urban Suffolk County) is approximately $829,000. Straight-line: $30,145 per year.
With cost segregation:
| Category | Amount | Year 1 Deduction |
|---|---|---|
| 5-Year Property (3 kitchens, 3 baths, flooring, fixtures, appliances, lighting) | $174,100 | $174,100 (100% bonus) |
| 15-Year Property (porch, sidewalks, driveway, fencing, landscaping) | $41,500 | $41,500 (100% bonus) |
| 27.5-Year Property (remaining wood-frame structure) | $613,400 | $22,310 (straight-line) |
| Total Year 1 Accelerated Deductions | $215,600 |
At a 42% combined rate, that's approximately $90,550 in estimated combined tax savings. The pre-1920 construction date and three full units of reclassifiable components push the total well into six-figure deduction territory.
Boston-Area Investment Neighborhoods
Greater Boston's construction cost index is approximately 1.20 relative to national average. The component-to-basis ratios remain favorable for cost segregation.
Dorchester / Mattapan (02121-02126, 02136): The triple-decker heartland. Purchase prices: $750K-$1.1M for three-units. Older construction with high reclassification rates. Active investor market with renovation-driven value-add plays.
Somerville / Cambridge (02143, 02144, 02138): Premium rents near Harvard, MIT, and Kendall Square. Triple-deckers here sell for $1.2M-$1.8M. The high basis generates proportionally larger absolute deductions.
South Boston / East Boston (02127, 02128): Rapidly appreciating neighborhoods with strong condo conversion activity. Investors buying and holding rental condos here have significant interior component reclassification potential.
Worcester / Springfield / Brockton: Gateway cities with triple-deckers available under $500K. Excellent cash flow markets where cost seg deductions materially improve after-tax returns. Even a $400K triple-decker generates $65K-$90K in accelerated Year 1 deductions.
Cape Cod / Martha's Vineyard / Nantucket: Seasonal STR markets with high nightly rates. Furnished vacation properties see the strongest reclassification percentages. Outdoor improvements (decks, landscaping, outdoor showers) qualify as 15-year property.
The STR Opportunity on the Cape and Islands
Massachusetts STR investors—particularly those with properties on Cape Cod, Martha's Vineyard, or Nantucket—benefit from the material participation rules. If your average guest stay is under 7 days and you spend 100+ hours per year managing the property, your rental losses become non-passive. Combined with cost segregation, those losses can offset your Boston-based W-2 income.
A physician, attorney, or finance professional earning $400K+ in Boston who owns a furnished Cape Cod STR purchased for $900K could generate $180K+ in Year 1 accelerated deductions. At a 42% combined rate, that's $75K in tax savings from a study that starts at $795.
100% Bonus Depreciation and Lookback
If you've owned your Boston property since 2021-2024 and used straight-line depreciation, a lookback study via Form 3115 captures all missed accelerated depreciation in one year. No amended returns needed. The cumulative catch-up on a triple-decker purchased three years ago can be substantial.
Getting Started
Provide your property details and we deliver a CPA-ready report with component-level depreciation schedules. Your CPA applies it to your federal and Massachusetts returns. The process takes less time than finding parking in Somerville.
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