San Diego, CA · $640K
Beachside condo, premium finishes
Year-1 federal benefit
$30,300
Condo / Townhome
Condo cost segregation: $18K–$68K Year-1 deductions.
Condos carry almost no 15-year land improvements (no driveway, no site work), so nearly all of the reclass is 5-year interior property.
The 30-second answer
Condo and townhome cost segregation is an engineering-based study that reclassifies a rental condo's components out of the default 27.5-year residential schedule into faster 5-year MACRS classes. A condo typically reclassifies 10–17% of building basis, and the composition is distinctive: because the HOA owns the land, the exterior, and most site improvements, a condo carries almost no 15-year land improvements, so nearly the entire reclassified amount is 5-year interior property — appliances, flooring, cabinetry, fixtures, and finishes. Across delivered studies that puts a condo's total in line with a single-family rental rather than below it, though a short-term rental still reclassifies more. With 100% bonus depreciation that amount is deductible in Year 1, though the loss is passive under IRC §469 unless you are a real estate professional, materially participate, or the unit is a short-term rental.
Condo cost segregation reclassifies 10–17% 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.
| Property type | Reclass to 5/7/15-yr | Year-1 federal benefit | Study cost |
|---|---|---|---|
| STR | 19–39% | $45K–$280K | From $495 |
| SFR | 5–32% | $10K–$165K | From $495 |
| Condo this page | 10–17% | $18K–$68K | From $495 |
| Brownstone | 5–20% | $60K–$640K | From $495 |
| Rowhouse | 5–18% | $10K–$170K | From $495 |
| Duplex | 13–21% | $31K–$105K | From $995 |
| Fourplex | 14–29% | $56K–$230K | From $995 |
| Office | 16–29% | $84K–$650K | From $1,995 |
| Retail | 20–37% | $90K–$690K | From $1,995 |
| 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 $1,995 |
| Multifamily | 14–28% | $44K–$200K | From $995 |
| Multifamily 5+ | 14–26% | $110K–$1.0M | From $1,995 |
| Triplex | 14–26% | $44K–$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 | 7–14% | $8K–$39K | From $495 |
| Commercial | 18–34% | $94K–$765K | From $1,995 |
| 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 |
Reclassification ranges from internal benchmarks across 4,000+ studies; 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.
Real examples
What condo cost seg looks like in practice.
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…
- ✓Higher-priced condos (>$400K basis) with premium finishes
- ✓STR-zoned condos in resort markets (unlocks the STR loophole even on a smaller footprint)
Skip it when…
- ×Condos under ~$200K basis
- ×Builder-grade units whose interiors carry little 5-year content (the interior IS the study)
Estimate
Run the numbers on your condo.
Pre-set to Condo defaults — adjust price + bracket to match your property.
Estimated Year-1 tax savings · Click to order →
$26,156
on $70,691 of accelerated deductions (Year 1, beyond straight-line)
typical $16,347–$27,790
Want this in writing for your CPA? Get a 1-page analysis →5-yr15-yr27.5/39-yr
Study cost
$895
ROI on study
29×
Delivery
< 1 hour
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
Condo cost segregation, by question.
Do condos and townhomes qualify for cost segregation?
Yes — typically 10–17% of basis across delivered studies. Because the HOA owns the land and exterior, the study focuses on the unit interior: appliances, flooring, cabinetry, fixtures, and finishes reclassify to 5-year property. That interior content is why a condo's total lands close to a single-family rental's even with no land improvements to claim.
How does a condo's reclassification compare to a single-family rental?
The totals are closer than most people expect — both run around 16% of depreciable basis across delivered studies — but they get there differently. A single-family rental includes the driveway, landscaping, fencing, and site work that reclassify as 15-year land improvements; a condo owner doesn't own any of that, the HOA does. What a condo carries instead is a higher share of 5-year interior property, so its reclass sits almost entirely in the 5-year class. A short-term rental still reclassifies more than either.
How much does a condo cost segregation study cost?
Condos are priced by value with single-family rentals: from $495 for a sub-$300K unit, $895 for $300K–$700K, and $995 up to $1M, delivered as a CPA-ready PDF, usually the next business day. Run the calculator first — the reclass is interior-only, so the benefit tracks unit value and finish level closely.
Regulation references
The rules that govern condo cost segregation.
- The 75/55 rule (STR loophole) — the 7-day average rule under Treas. Reg. § 1.469-1T(e)(3)(ii)(A) that reclassifies short-term rentals from rental activity to non-rental trade or business, unlocking W-2 income offset without REPS.
- 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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