All residential rental property — regardless of unit count — depreciates over 27.5 years by default. The cost segregation opportunity compounds with unit count because every unit adds its own kitchen, bathroom, appliances, flooring, and fixtures. A duplex accelerates $15K–$30K in Year-1 deductions. A fourplex: $25K–$60K. A 20-unit building: $100K–$200K. A 100-unit complex: $500K+. With 100% bonus depreciation restored under the OBBBA for 2025+, the full reclassified amount is deductible in Year 1.
Why Multifamily Outperforms Single-Family on Cost Seg
Cost segregation math scales with unit count for one simple reason: the 5-year class components (appliances, cabinetry, flooring, fixtures, specialty lighting) are roughly fixed per unit. A duplex has 2 kitchens; a fourplex has 4; a 50-unit has 50. Each kitchen has its own $3K–$8K of cabinets, countertops, range, refrigerator, dishwasher, sink — all 5-year personal property.
The 15-year land-improvement bucket also scales non-linearly with unit count. Small multifamily shares one driveway and one landscaping package. A 20-unit garden-style apartment has multiple parking areas, walkways, retaining walls, pool/laundry buildings, dumpster enclosures, fencing, signage — 15-year items that don't exist on SFRs at all.
Typical reclassification ranges by property size:
- 2–4 unit (duplex, triplex, fourplex): 18–25% of depreciable basis
- 5–20 unit: 22–28%
- 20–100 unit: 25–32%
- 100+ unit institutional: 28–35%
Compare to a typical single-family rental at 15–22% and a short-term rental at 25–32%. Multifamily 20+ units routinely hits STR-level reclassification without any of the short-term-rental complexity (no furnishings, no material participation tests).
Example 1: Duplex House-Hack — $420K Purchase, Rental Half Cost-Segged
Austin, TX — Owner-Occupied Duplex
A 2022-built side-by-side duplex in East Austin. Owner lives in Unit A, rents Unit B at $2,400/mo. Cost segregation applies only to the rental half (50% of property basis = $210K depreciable basis after land allocation).
| Component (Rental Unit only) | MACRS Class | Amount |
|---|---|---|
| Appliances (range, fridge, dishwasher, microwave, W/D) | 5-yr | $4,200 |
| Cabinetry, countertops, interior finishes | 5-yr | $9,500 |
| LVP flooring, specialty lighting | 5-yr | $6,800 |
| HVAC (qualifies as 5-yr if split system) | 5-yr | $5,500 |
| Fenced side yard, private patio pavers | 15-yr | $7,200 |
| Driveway, parking pad allocation | 15-yr | $4,800 |
| Total reclassified (20% of rental-half basis) | $38,000 |
This is the smallest-scale cost seg study that still makes clear economic sense. A conventional engineer-based study would cost $3,500–$5,000 and take 6 weeks; at that fee, the math starts to break down. Automated methodology at $995 keeps the ROI clean even on half-basis studies.
Example 2: Fourplex — $600K, 4 Identical Units
Tampa, FL — Suburban 4-Plex
A 1980s-era fourplex with shared parking, basic landscaping, and single-phase HVAC per unit. Uniform unit configuration simplifies the component analysis — same kitchen package, same bath package, same flooring across all 4 units.
| Component (all 4 units) | MACRS Class | Amount |
|---|---|---|
| 4 × appliance packages (2024 upgrades) | 5-yr | $16,800 |
| 4 × cabinetry, countertops, interior finishes | 5-yr | $38,000 |
| 4 × flooring replacement (2024 update) | 5-yr | $24,000 |
| Shared laundry room — W/D, utility sink | 5-yr | $6,500 |
| Exterior light fixtures, pathway lighting | 5-yr | $4,200 |
| Shared asphalt parking lot, striping | 15-yr | $22,000 |
| Landscaping, fencing, dumpster enclosure | 15-yr | $11,500 |
| Total reclassified (23.4% of basis) | $123,000 |
The fourplex is a sweet spot for cost seg: four-times the per-unit reclassification with only one study fee. The shared parking lot and shared landscaping add meaningful 15-year property that a single-family rental wouldn't have. Tax savings here fund a full year of mortgage payments on the property.
Example 3: Small Apartment Building — $1M, 8 Units
Denver, CO — 8-Unit Garden Apartment
Classic 1970s garden apartment with two 4-unit buildings sharing a central courtyard, surface parking, and a small pool. Previous owner renovated 6 of 8 units in 2022 with modern finishes (recorded as capital improvements, so they carry into the new owner's basis for cost seg purposes).
| Component | MACRS Class | Amount |
|---|---|---|
| 8 × kitchens (appliances, cabinetry, counters) | 5-yr | $68,000 |
| 8 × bathroom vanities, fixtures, tile | 5-yr | $32,000 |
| Flooring across 6 renovated units | 5-yr | $28,500 |
| Specialty lighting, ceiling fans, smart thermostats | 5-yr | $9,200 |
| Pool equipment (pump, filter, heater) | 5-yr | $12,500 |
| Pool shell and concrete decking | 15-yr | $28,000 |
| Asphalt parking, concrete walkways, retaining walls | 15-yr | $35,000 |
| Landscaping, irrigation, exterior lighting | 15-yr | $18,500 |
| Total reclassified (23.2% of basis) | $231,700 |
The inflection point where pool/parking/landscaping infrastructure starts to matter materially. A $12K pool equipment package deducted in Year 1 vs. over 27.5 years is the difference between a cash-flow-positive Year 1 and a break-even one for the typical LP.
Example 4: Mid-Size Apartment — $4M, 32 Units
Phoenix, AZ — 32-Unit Class C Value-Add
Typical Class-C value-add syndication: 32 units on 1.2 acres with three 2-story buildings, shared pool, laundry room, leasing office. Part of a larger syndication where Year-1 losses flow to 15+ LPs via K-1s.
| Component | MACRS Class | Amount |
|---|---|---|
| 32 × kitchens, bathrooms, interior packages | 5-yr | $384,000 |
| In-unit HVAC (32 split systems) | 5-yr | $168,000 |
| Appliance packages, W/D hookups | 5-yr | $112,000 |
| Common area: laundry room, leasing office | 5-yr | $45,000 |
| Pool equipment, cabana, BBQ area | 5-yr | $38,000 |
| Pool shell, concrete decking, fencing | 15-yr | $78,000 |
| Asphalt parking (32 spaces + overflow) | 15-yr | $135,000 |
| Landscaping, exterior lighting, signage | 15-yr | $82,000 |
| Retaining walls, dumpster enclosures | 15-yr | $34,000 |
| Total reclassified (26.9% of basis) | $1,076,000 |
At this scale the study fee is a rounding error. The 32-unit property generates ROI more than 200x the study cost — meaning every $10 spent on the study returns ~$2,000 in Year-1 tax deductions flowing through to LPs' K-1s. Syndicators who don't cost-seg are giving their LPs materially worse Year-1 tax outcomes than competitors who do.
Example 5: Condo Portfolio — $1.7M Across 2 Units
Miami, FL — 2 Waterfront Condos
Two waterfront condominium units in the same building, purchased in the same year. Condo ownership limits cost-seg opportunity compared to fee-simple multifamily because association common elements (pool, gym, hallways, exterior) don't belong to the individual owner — but interior finishes and unit-specific fixtures still qualify.
| Component (both units) | MACRS Class | Amount |
|---|---|---|
| 2 × high-end kitchens (Sub-Zero, Wolf, Miele) | 5-yr | $88,000 |
| 2 × master bath suites (soaking tubs, custom tile) | 5-yr | $52,000 |
| Custom built-in closets, wine storage | 5-yr | $34,000 |
| Smart home systems, motorized shades | 5-yr | $28,000 |
| Engineered hardwood, porcelain tile | 5-yr | $42,000 |
| Balcony-specific fixtures (outdoor kitchens) | 15-yr | $18,500 |
| Total reclassified (22.2% of basis after land) | $262,500 |
Condo math is different from fee-simple multifamily: the limited common-element ownership means no 15-year parking-lot or landscaping allocation, but luxury interior fit-out more than compensates when the original build was high-spec. Florida's zero state income tax means every dollar of federal savings stays in the owner's pocket without any state-level conformity concerns.
Example 6: Large-Scale Apartment Complex — $15M, 120 Units
Atlanta, GA — 120-Unit Institutional Complex
Institutional-scale garden-style apartment complex on 7 acres with four 3-story buildings, central amenities (pool, fitness center, dog park, mail room), and surface parking. 120 units across three building types. Owned in a multi-investor LLC structure.
| Component | MACRS Class | Amount |
|---|---|---|
| 120 × unit interiors (kitchens, baths, flooring) | 5-yr | $1,680,000 |
| 120 × HVAC systems (split systems per unit) | 5-yr | $540,000 |
| Common area finishes (leasing, fitness, mail room) | 5-yr | $180,000 |
| Pool equipment, fitness equipment, office fixtures | 5-yr | $95,000 |
| Specialty lighting, signage, security systems | 5-yr | $72,000 |
| Pool shell, decking, cabana | 15-yr | $145,000 |
| Asphalt parking + 230 spaces + overflow | 15-yr | $625,000 |
| Landscaping, irrigation, retaining walls | 15-yr | $385,000 |
| Dog park, playground, walking paths | 15-yr | $98,000 |
| Exterior site lighting, pathway lighting | 15-yr | $78,000 |
| Total reclassified (26.5% of basis) | $3,978,000 |
Institutional scale: $3,978,000 of accelerated depreciation in Year 1 on a $15M acquisition. With 100% bonus depreciation, that's deducted immediately. At a 37% effective rate across LPs, the Year-1 tax-equivalent value is close to $1.47 million — roughly 10% of the entire purchase price recovered in tax savings in year one. This is why large multifamily LP offerings increasingly make cost segregation part of the standard due-diligence package: it's material to the investor IRR.
What Drives the Variance Between Examples
Reclassification percentages across these 6 examples range from 18.1% (duplex owner-occupied, with half-basis constraint) to 26.9% (mid-size and institutional complexes). The three biggest drivers:
- Unit count — more units means more per-unit 5-year components (appliances, cabinets, fixtures) relative to the structural shell
- Shared amenities and site improvements — pools, parking lots, landscaping, common-area buildings all add 15-year class that SFRs don't have
- Recent renovation history — properties with 2020+ renovations often carry documented improvement basis that's easier to reclassify than 30+ year old finishes
Condos are a notable outlier: despite being "multifamily" in name, they behave more like SFRs because the common elements aren't in the owner's basis. Expect 18–24% typical reclassification on high-end condos.
Study Cost by Property Size
Our pricing scales by purchase price, not by unit count. For a full pricing breakdown, see cost segregation study cost. Quick reference for multifamily:
- Duplex / triplex / fourplex under $1M: $995
- Multifamily 2-4 units $1M–$2M: $1,395
- Multifamily 2-4 units $2M+: $1,495
- Multifamily 5+ units under $1M: $995
- Multifamily 5+ units $1M–$2M: $1,395
- Multifamily 5+ units $2M–$15M: $1,895
- Multifamily 5+ units $15M+: $2,995 (includes complimentary site visit)
A note on passive loss limits: Unlike short-term rentals, traditional multifamily rentals are default "passive" activities under §469. The accelerated depreciation losses flow through but can only offset passive income unless the owner qualifies as a Real Estate Professional (REPS) under §469(c)(7). Syndication LPs often can't use the losses until future passive income or property sale. Check with your CPA on your specific situation before assuming Year-1 tax savings will be fully usable in the current year.
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