Phoenix, AZ · $2.8M
12-unit garden apartment, 1980s build
Year-1 federal benefit
$140,900
Multifamily (5+ units)
Multifamily 5+ cost segregation: $110K–$1.0M Year-1 deductions.
5-30 unit properties hit the sweet spot: dense per-unit fixtures, but small enough that an automated engineered study still beats sending an engineer onsite.
The 30-second answer
Apartment (5+ unit multifamily) cost segregation is an engineering-based study that reclassifies an apartment property's components out of the default 27.5-year residential schedule into faster 5- and 15-year MACRS classes. Larger multifamily reclassifies solidly for residential — typically 15–20% of building basis — because it stacks dense per-unit fixtures (kitchens, appliances, bath sets, in-unit HVAC) with substantial site work and common areas: parking lots, landscaping, pool and amenity areas, and exterior lighting (15-year). With 100% bonus depreciation that amount is deductible in Year 1; the loss is passive under IRC §469 unless you qualify as a real estate professional or materially participate.
Multifamily 5+ cost segregation reclassifies 14–26% 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 | 22–33% | $52K–$235K | From $495 |
| SFR | 8–32% | $16K–$165K | From $495 |
| Condo | 10–17% | $16K–$61K | From $495 |
| Brownstone | 5–20% | $60K–$640K | From $495 |
| Rowhouse | 5–18% | $10K–$170K | From $495 |
| Duplex | 13–20% | $31K–$100K | From $995 |
| Fourplex | 16–29% | $64K–$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 | 15–28% | $48K–$200K | From $995 |
| Multifamily 5+ this page | 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 |
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 multifamily 5+ 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…
- ✓5-30 unit properties (sweet spot for automated engineering)
- ✓Value-add operators completing renos — study at end of reno locks in the upgraded basis
- ✓Operators who can use accelerated depreciation against passive K-1 income
Skip it when…
- ×Buildings 100+ units (consider a traditional firm with on-site engineering)
- ×Properties mid-renovation (wait until placed-in-service)
Estimate
Run the numbers on your multifamily 5+.
Pre-set to Multifamily 5+ defaults — adjust price + bracket to match your property.
Estimated Year-1 tax savings · Click to order →
$23,588
on $63,750 of accelerated deductions
Want this in writing for your CPA? Get a 1-page analysis →5-yr15-yr27.5/39-yr
Study cost
$1,995
ROI on study
12×
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
Multifamily 5+ cost segregation, by question.
Do apartment buildings (5+ units) qualify for cost segregation?
Yes — typically 15–20% of basis, driven by per-unit fixtures plus site work and common areas — because they combine dense per-unit fixtures (kitchens, appliances, bath sets, in-unit HVAC) with extensive site work and common areas: parking, landscaping, pool and amenity areas, and exterior lighting. The whole reclassified amount is deductible in Year 1 under 100% bonus depreciation.
What drives the reclassification on an apartment complex?
Two things: the unit count multiplied by the appliances and fixtures in each unit (5-year property), and the site — parking lots, landscaping, amenity areas, and exterior lighting (15-year land improvements). The larger the site and amenity footprint relative to the building, the higher the reclassification.
How much does a 5+ unit multifamily study cost?
Multifamily 5+ is priced from $1,995 for a sub-$1M property and $3,595 for a $1M–$3M property, delivered as a CPA-ready PDF in under an hour. Most are completed remotely; a larger or more complex property (our default at $3M+ basis) may include an on-site observation.
Regulation references
The rules that govern multifamily 5+ cost segregation.
- 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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