Cost Segregation in NYC: $168,000 in Accelerated Depreciation

NYC investors face 50%+ combined tax rates across federal, state, and city. Every dollar reclassified through cost segregation saves more here than almost anywhere else in the country.

$168,000 Accelerated Depreciation

$89,040 Est. Year-1 Tax Savings

64x Return on Study Cost

See Your NYC Tax Savings

Property Type

Purchase Price

$89,040

Estimated Year-1 Tax Savings

$168,000

Accelerated Deductions

$1,395

Study Cost

64x

ROI on Study

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Estimates are for illustration only. Details

MACRS Depreciation Breakdown

Accelerated Depreciation by MACRS Class

$168,000 total reclassified into shorter recovery periods

5-Year Property $117,600

70%

7-Year Property $13,440

15-Year Property $36,960

22%

Estimated Year-1 Tax Savings $89,040

Illustrative estimate. Final allocations vary based on property facts and report findings.

Method

Year-1 Deduction

Difference

Standard (27.5yr straight-line)

$30,545

—

With Cost Segregation + Bonus

$168,000

+$137,455

Estimated deduction based on typical cost segregation allocations for NYC duplex properties. Actual study results may vary based on property-specific analysis including age, condition, renovations, and local construction costs.

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Component-by-component breakdown, MACRS schedules, and Form 3115 filing instructions. This is the actual deliverable — see exactly what your CPA receives.

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Cost Segregation in New York City

$1.2M Brooklyn brownstone duplex — cost segregation depreciation example

Top Neighborhoods

Park Slope, Williamsburg, Bed-Stuy, Astoria, Harlem

Typical Year-1 Savings

$55,000–$120,000

New York City's real estate market is defined by high entry prices and even higher tax burdens. Investors in Brooklyn brownstones, Queens two-families, and Harlem row houses routinely pay $800K-$2M for multi-unit properties — and then face a combined federal, state, and city tax rate that can exceed 53%. That tax rate is precisely what makes cost segregation so powerful here: every dollar reclassified into a shorter MACRS class saves more than half a dollar in taxes.

For a $1.2M Brooklyn brownstone duplex, cost segregation typically reclassifies $168,000 into accelerated MACRS categories. At NYC's combined rate of roughly 53% (37% federal + 10.9% NY state + 3.876% NYC + NIIT), that translates to approximately $89,000 in first-year tax savings. The study costs $1,395 — a 64x return on investment.

Multi-unit brownstones and row houses are particularly strong candidates because they contain duplicated building systems across units (separate HVAC, plumbing risers, electrical panels, kitchen and bath fixtures), plus high-value interior finishes common in pre-war and renovated properties — ornamental woodwork, decorative mantels, custom tile work, and iron railings. Site improvements like stoops, rear garden hardscaping, and fencing add to the 15-year reclassification pool.

What People Worry About (and What Actually Happens)

"Will this trigger an IRS audit?"

No. Cost segregation is explicitly supported by IRS guidelines (Rev. Proc. 87-56) and the IRS Audit Techniques Guide for Cost Segregation. Tens of thousands of studies are filed every year. Our reports are designed to withstand scrutiny — that's why they run 35+ pages with component-level documentation.

"Is this aggressive tax strategy?"

Cost segregation is standard practice, not a loophole. The IRS has published formal guidance on how to do it correctly. Every Big 4 accounting firm offers it. We follow the same engineering-based methodology — just faster and at a fraction of the cost.

"What about NY state depreciation recapture?"

New York State conforms to federal bonus depreciation rules, so you get the full state-level benefit upfront. If you sell, you'll owe depreciation recapture at 25% federally plus applicable NY state recapture. However, if you 1031 exchange into another property, recapture is deferred indefinitely. For most NYC investors, the upfront savings at 53%+ combined rates far outweigh eventual recapture at 25%.

"My CPA hasn't mentioned this."

Most CPAs know about cost segregation but don't proactively recommend it because they don't do the engineering analysis in-house. That's what we provide. Your CPA files the results — we email them a CPA-ready package with everything they need, and we answer any questions they have directly.

Why Cost Segregation Works for Multi-Unit Properties

Multi-unit residential properties like duplexes and brownstones contain a higher density of depreciable components per dollar of purchase price than most single-family homes. Each unit has its own kitchen fixtures, bathroom finishes, appliances, lighting, and often separate HVAC and electrical systems. These duplicated building systems multiply the reclassification opportunity across the entire property.

Beyond interior components, site improvements add additional reclassification value. Stoops, walkways, patios, fencing, exterior lighting, landscaping, and rear-yard hardscaping fall into the 15-year MACRS class rather than the default 27.5-year residential schedule. For NYC properties with stoops, ironwork, or garden-level entries, these components represent a meaningful share of the total reclassified amount.

With 100% bonus depreciation permanently restored under the One Big Beautiful Bill Act (signed July 2025), every dollar reclassified into 5-year, 7-year, or 15-year MACRS classes is deductible in full in the first year. For duplex owners who actively manage their property, these accelerated deductions can offset W-2 and business income — not just passive rental income.

Who This Example Applies To

Owners of brownstones, row houses, two-families, and small multi-unit buildings in NYC
Investors in the 32-37% federal bracket (plus NY state and NYC taxes)
Properties purchased or placed in service in 2025 or later (100% bonus depreciation)
Landlords with renovated or high-finish interiors (custom kitchens, pre-war details, updated systems)

If your property is a passive investment managed entirely by a third party, the accelerated depreciation may only offset passive income. If your property is a co-op (not a condo), cost segregation may not apply since you don't own the building directly. Actual results vary based on property age, condition, renovations, and construction type.

Hear From a Rental Property Owner Who Did This

This investor ordered a cost segregation study and used the accelerated depreciation on their next tax return. Here's what happened.

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Compare: NYC Duplex at Different Price Points

Price	Accelerated	Tax Savings	Study Cost	ROI
$800K	$112,000	$59,360	$995	60x
$1.2M	$168,000	$89,040	$1,395	64x
$1.5M	$210,000	$111,300	$1,395	80x
$2M	$280,000	$148,400	$1,495	99x

Compare: $1,200,000 Across Property Types

Property Type	Accelerated	Tax Savings	Study Cost	ROI
Duplex	$168,000	$89,040	$1,395	64x
Single-Family Rental	$192,000	$71,040	$1,195	59x
Condo	$142,800	$52,836	$1,195	44x

Frequently Asked Questions

How does NYC's combined tax rate affect cost segregation savings? ▼

NYC investors face one of the highest combined tax rates in the country — up to 53% when you add federal (37%), New York State (10.9%), NYC local (3.876%), and the Net Investment Income Tax (3.8%). This means every dollar of accelerated depreciation saves roughly 53 cents in taxes, compared to 37 cents in a no-income-tax state like Texas. Cost segregation is disproportionately valuable in high-tax jurisdictions like New York City.

Do brownstones qualify for cost segregation? ▼

Yes. Brownstones are ideal candidates for cost segregation. These properties typically contain high-value interior finishes (ornamental woodwork, decorative mantels, custom cabinetry), multiple mechanical systems, and site improvements like stoops, ironwork railings, and rear garden hardscaping — all of which can be reclassified into shorter MACRS recovery periods. Multi-unit brownstones (duplexes, triplexes) often yield even higher reclassification percentages due to duplicated building systems across units.

Can I do a cost segregation study on a rent-stabilized NYC unit? ▼

Yes. Rent stabilization affects rental income, not depreciation. A cost segregation study reclassifies building components based on their IRS asset class, regardless of how rent is regulated. The depreciable basis is determined by your purchase price minus land, and the component reclassification follows the same engineering methodology. Many NYC investors with mixed rent-stabilized and market-rate units use cost segregation to offset the lower cash flow from stabilized units.