$1M Multifamily: Your Cost Segregation Breakdown

Multifamily properties at $1M feature common-area improvements, shared building systems, and per-unit components — all creating a rich landscape for cost segregation.

$144,000 Accelerated Depreciation

$53,280 Est. Year-1 Tax Savings

45x Return on Study Cost

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Property Type

Purchase Price

Depreciable Basis (80%) $800,000

Accelerated Depreciation $144,000

Est. Year-1 Tax Savings $53,280

Study Cost $1,195

Return on Study 45x

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MACRS Depreciation Breakdown

MACRS Class	Amount	% of Accelerated	Bonus Eligible
5-Year Property	$79,200	55%	Yes — 100%
7-Year Property	$17,280	12%	Yes — 100%
15-Year Property	$47,520	33%	Yes — 100%
27.5yr Property	$656,000	82%	No — standard schedule
Total Depreciable Basis	$800,000	100%	—

Method	Year-1 Deduction	Difference
Standard Straight-Line (27.5yr)	$29,091	—
With Cost Segregation + Bonus	$144,000	+$114,909

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

What This Means for You

A $1M multifamily property — typically a 5-10 unit building — generates substantial accelerated depreciation through cost segregation. The study typically reclassifies $144K into shorter MACRS classes, producing approximately $53K in first-year tax savings. The economics are straightforward: spend $1,495 on the study, recover $53K in tax savings.

Multifamily properties offer unique reclassification opportunities that single-family rentals don't. Common-area improvements like hallway lighting, entry systems, mailbox installations, parking lot paving, shared laundry equipment, and security systems all fall into accelerated recovery classes. Add the per-unit components (kitchens, bathrooms, flooring) across 5-10 units, and the reclassifiable basis adds up quickly.

The passive loss rules work differently at this scale: investors with $1M+ in multifamily typically have enough rental income to absorb the accelerated depreciation deductions regardless of their AGI. And if you qualify as a Real Estate Professional (spending 750+ hours annually in real estate activities), the passive loss limitations don't apply at all.

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Compare: Multifamily at Different Price Points

Price	Accelerated	Tax Savings	Study Cost	ROI
$1M	$144,000	$53,280	$1,195	45x
$5M	$720,000	$266,400	$1,295	206x

Compare: $1,000,000 Across Property Types

Property Type	Accelerated	Tax Savings	Study Cost	ROI
Airbnb / Short-Term Rental	$272,000	$100,640	$1,195	84x
Multifamily	$144,000	$53,280	$1,195	45x
Rental Property	$144,000	$53,280	$1,195	45x

Frequently Asked Questions

What is a cost segregation study? ▼

A cost segregation study is an engineering-based analysis that reclassifies components of your property into shorter IRS depreciation categories (5, 7, and 15 years) instead of the default 27.5 or 39 years. This accelerates your depreciation deductions, reducing your tax bill in the early years of ownership.

What components get reclassified in a multifamily property? ▼

Multifamily properties have per-unit components (kitchens, bathrooms, flooring, fixtures) plus common-area improvements (hallway lighting, entry systems, mailboxes, parking lots, laundry equipment, security systems). Both categories qualify for accelerated MACRS classification, making multifamily properties especially rich in reclassifiable components.

Is bonus depreciation available in 2026? ▼

Yes. The One Big Beautiful Bill Act permanently restored 100% bonus depreciation for property placed in service in 2025 and beyond. This means you can deduct the full amount of accelerated depreciation identified in your cost segregation study in year one.