Atlanta, GA · $680K
Triplex, recent appliance refresh
Year-1 federal benefit
$36,200
Multifamily (2-4 units)
Multifamily cost segregation: $44K–$200K Year-1 deductions.
Each additional unit multiplies the kitchen + bath + HVAC count, and those are the densest 5-yr personal-property categories.
The 30-second answer
Small multifamily cost segregation is an engineering-based study that reclassifies a 2–4 unit rental's components out of the default 27.5-year residential schedule into faster 5- and 15-year MACRS classes. A small multifamily building reclassifies in the middle of the residential range — typically 14–28% of building basis — because each unit multiplies the densest 5-year categories: kitchens, appliances, bath fixtures, and HVAC systems, on top of the shared parking, landscaping, and site work. With 100% bonus depreciation the reclassified 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 cost segregation reclassifies 14–28% 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. For the general explanation, see what a cost segregation study is and what the report contains.
| Property type | Reclass to 5/7/15-yr | Year-1 federal benefit | Study cost |
|---|---|---|---|
| STR | 19–39% | $45K–$280K | From $495 |
| SFR | 8–32% | $16K–$165K | From $495 |
| Condo | 10–19% | $18K–$76K | From $495 |
| Brownstone | 5–20% | $60K–$640K | From $495 |
| Rowhouse | 5–18% | $10K–$170K | From $495 |
| Duplex | 8–21% | $19K–$105K | From $995 |
| Fourplex | 14–29% | $56K–$230K | From $995 |
| Office | 16–29% | $84K–$650K | From $995 |
| Retail | 20–37% | $90K–$690K | From $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 $995 |
| Multifamily this page | 14–28% | $44K–$200K | From $995 |
| Multifamily 5+ | 14–26% | $110K–$1.0M | From $1,995 |
| Triplex | 8–26% | $25K–$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 $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 |
| Funeral homes | 18–30% | $135K–$900K | By proposal |
| Child day care | 15–28% | $56K–$630K | From $2,995 |
| Adult day care | 14–26% | $78K–$780K | From $2,995 |
| Church | 10–22% | $37K–$825K | From $2,995 |
| Farm | 8–65%† | $19K–$780K | From $995 |
Reclassification ranges from the bands we publish per property type (measured on our delivered studies where we have enough of a type, modeled elsewhere); 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+. The ADU figure is an ADU acquired with a house; one the owner built or converted is priced on its documented construction cost, from $995. See full provider comparison.
† Farm: the figure is property with a recovery period of 20 years or less, on a farm with one or more rental houses on it. It counts 10- and 20-year property, which no other row has, and its dollar figure is a first-year deduction, not tax saved. A farm is quoted from a list of what is on it; see how.
Worked examples · modeled
What multifamily cost seg looks like in practice.
Illustrative, modeled properties, not client engagements. 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…
- ✓2-4 unit properties with separate utilities per unit (more 5-yr property)
- ✓Owner-operators with active income or REPS
- ✓Owners considering Form 3115 lookback on properties bought 2+ years ago
Skip it when…
- ×Units with shared mechanicals (single boiler/HVAC) — reclassification drops
Estimate
Run the numbers on your multifamily.
Pre-set to Multifamily defaults — adjust price + bracket to match your property.
Estimated Year-1 tax savings · Click to order →
$26,156
on $70,691 of accelerated deductions (Year 1, beyond straight-line)
typical $20,343–$40,687
Want this in writing for your CPA? Get a 1-page analysis →5-yr15-yr27.5/39-yr
Study cost
$1,295
ROI on study
20×
Delivery
1–2 business days
Your study includes more than the report.
- Engineering-based, property-specific analysis
- Direct coordination with your CPA
- Free revisions for 12 months; corrections of our errors always free
- Renovation analysis under $100,000 included
- Lifetime written audit support
- CPA-ready depreciation schedules and Excel fixed-asset file
Everything included in your study fee. Form 3115 preparation available separately.
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 cost segregation, by question.
Do small multifamily (2–4 unit) properties qualify for cost segregation?
Yes — typically 14–28% of basis, in the middle of the residential range — because each unit multiplies the kitchens, appliances, bath fixtures, and HVAC systems that make up the 5-year bucket, plus the parking and site work. The whole reclassified amount is deductible in Year 1 under 100% bonus depreciation.
Can the loss offset my regular income?
A small multifamily rental loss is passive under IRC §469, so it offsets passive income unless you qualify as a real estate professional or materially participate. Confirm your situation with your CPA before ordering — it's the key factor in how quickly you use the deduction.
How much does a small multifamily study cost?
Small multifamily (2–4 units) is priced from $995 for a sub-$300K property, $1,295 for $300K–$700K, and $1,495 up to $1M, delivered as a CPA-ready PDF, within 1–2 business days.
Regulation references
The rules that govern multifamily cost segregation.
- Multifamily Cost Segregation: What Reclassifies, From Duplexes to 100+ Units — our in-depth guide to multifamily 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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