San Diego, CA · $640K
Beachside condo, premium finishes
Year-1 federal benefit
$24,300
Condo / Townhome
Condo cost segregation: $10K–$35K Year-1 deductions.
Condos have less land-improvement weight (no driveway, smaller exterior footprint), so the math is tighter than SFR.
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 reclassifies less than a single-family rental — typically 14–18% of building basis — because the HOA owns the land, the exterior, and most site improvements, so the study is largely limited to the unit interior: appliances, flooring, cabinetry, fixtures, and finishes. 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 14–18% 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 | 20–28% | $20K–$80K | From $495 |
| SFR | 16–22% | $15K–$50K | From $495 |
| Condo this page | 14–18% | $10K–$35K | From $495 |
| Duplex | 20–25% | $18K–$55K | From $795 |
| Fourplex | 22–26% | $30K–$90K | From $795 |
| Office | 16–22% | $40K–$150K | From $1,995 |
| Retail | 24–30% | $50K–$180K | From $1,995 |
| Industrial | 16–25% | $30K–$120K | From $2,495 |
| Self-storage | 20–26% | $45K–$370K | From $2,495 |
| Medical office | 26–38% | $60K–$220K | From $2,495 |
| Mixed-use | 24–30% | $45K–$200K | From $1,995 |
| Multifamily | 22–26% | $25K–$80K | From $795 |
| Multifamily 5+ | 24–30% | $60K–$300K | From $1,995 |
| Triplex | 22–25% | $22K–$70K | From $795 |
| Restaurant | 30–43% | $80K–$280K | From $2,495 |
| Vet | 22–28% | $45K–$175K | From $2,495 |
| Gym | 19–35% | $45K–$250K | From $2,495 |
| Dealership | 30–48% | $300K–$1M | From $2,495 |
| ADU | 20–28% | $8K–$30K | From $495 |
| Commercial | 22–32% | $40K–$200K | From $1,995 |
| Data center | 45–60% | $600K–$3.4M | $4,995–$54,995 (sub-$100M); $100M+ by proposal |
| Senior living | 20–30% | Custom-scoped | By proposal |
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+. 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
- ×HOA-heavy buildings where the unit interior is the only depreciable component
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 →
$29,600
on $80,000 of accelerated deductions
Want this in writing for your CPA? Get a 1-page analysis →5-yr15-yr27.5/39-yr
Study cost
$895
ROI on study
33×
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, though the result is the smallest of the residential types — typically 14–18% of basis. 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. It still produces a meaningful Year-1 deduction under 100% bonus on a higher-value or premium-finish unit.
Why does a condo reclassify less than a single-family rental?
Because the depreciable building is just the interior. A single-family rental includes the driveway, landscaping, fencing, and site work (15-year land improvements) that a condo owner doesn't own — the HOA does. With only the interior to study, the reclassifiable share is smaller, so a condo runs 14–18% versus 16–22% for an SFR.
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 in under an hour. Run the calculator first — the math is tighter on a condo, so the benefit should clearly justify the fee.
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).