Colorado Springs: Where Military Demand Meets Investment Opportunity
Colorado Springs is home to five military installations: Fort Carson, Peterson Space Force Base, Schriever Space Force Base, Cheyenne Mountain Space Force Station, and the United States Air Force Academy. Together, they employ over 50,000 military and civilian personnel. That creates one of the most consistent rental demand environments in the country—military families on PCS orders need housing, typically for 2-4 year rotations, and they pay with BAH stipends that reliably cover market rents.
The median home price in El Paso County sits around $435,000 as of early 2026. Popular investment areas like Fountain, Security-Widefield, and the Powers corridor offer properties in the $325K-$450K range with strong rental yields. The Broadmoor and Northgate areas push $500K-$700K for higher-end investment properties.
Most Colorado Springs investors are depreciating these properties over 27.5 years. A cost segregation study reclassifies 20-25% of the depreciable basis into shorter categories, and with 100% bonus depreciation permanently restored, the entire reclassified amount can be deducted in Year 1.
Colorado's 4.4% Flat Tax and State Conformity
Colorado charges a flat 4.4% state income tax and generally conforms to federal depreciation rules, including bonus depreciation. That means cost segregation deductions reduce both your federal and Colorado state tax liability. For an investor in the 37% federal bracket, the combined rate is approximately 41.4%, making every $100,000 in accelerated depreciation worth roughly $41,400 in combined tax savings.
Colorado conforms to federal bonus depreciation. Combined federal + state savings of 41.4% mean a $400K Colorado Springs rental can generate $15K-$25K in Year 1 tax savings from a cost seg study starting at $795.
A Real Example: 4BR Rental Near Fort Carson
The property: A 4-bedroom, 3-bathroom single-family rental in Fountain (80817), purchased in July 2023 for $425,000. Built in 2015. Rented to a military family at $2,100/month. The owner is a retired Army officer with 1099 consulting income of $185,000.
Without cost segregation: Depreciable basis (after 18% land) is approximately $348,500. Straight-line: $12,670 per year.
With cost segregation:
| Category | Amount | Year 1 Deduction |
|---|---|---|
| 5-Year Property (appliances, cabinetry, flooring, fixtures, ceiling fans) | $52,300 | $52,300 (100% bonus) |
| 15-Year Property (driveway, landscaping, fencing, patio, sidewalks) | $24,400 | $24,400 (100% bonus) |
| 27.5-Year Property (remaining structure) | $271,800 | $9,880 (straight-line) |
| Total Year 1 Accelerated Deductions | $76,700 |
At a combined 41% rate, that's approximately $31,450 in estimated combined tax savings. The study starts at $795—a 39x return on investment.
Colorado Springs Neighborhoods
Fountain / Security-Widefield (80817, 80911): The primary rental market for Fort Carson families. Purchase prices: $325K-$425K. Strong demand, low vacancy. Multiple properties in this area compound the cost seg benefit.
Powers Corridor / Stetson Hills (80916, 80951): Newer construction near Peterson SFB. $375K-$500K. Popular with Space Force and defense contractor families.
Northgate / Briargate (80920, 80921): Higher-end rentals near the Air Force Academy. $450K-$600K. Quality finishes that generate meaningful 5-year property reclassification.
Old Colorado City / Westside (80904): Older homes, some STR activity near Garden of the Gods and Manitou Springs. Pre-1970 construction generates higher reclassification percentages.
Manitou Springs: Tourism-driven STR market at the base of Pikes Peak. Furnished vacation rentals here see the highest reclassification rates due to furnishing packages and outdoor improvements.
100% Bonus Depreciation and Lookback
The OBBBA permanently restored 100% bonus depreciation. Lookback studies via Form 3115 capture missed accelerated depreciation for properties purchased in prior years. No amended returns needed.
Getting Started
Provide your property address, purchase price, type, year built, and any significant improvements. We deliver a CPA-ready PDF report with component-level depreciation schedules in under an hour. Your CPA applies it to your federal and Colorado state returns.
How Much Can You Save in Year One?
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