Is Cost Segregation Worth It for One Rental Home?

One property is enough to ask the question

You do not need an apartment portfolio to evaluate a study. For a rental house, the decision starts with the building basis, what is already on the depreciation schedule, the study fee and the timing of usable deductions. A home used entirely for personal purposes is a different situation: ordinary personal residential use does not create depreciable rental property. If you rent part of your home or recently converted it to a rental, establish the income-producing portion first.

Put the minimum fee in the calculation

At Stratum, a 1,400-square-foot house and a 2,000-square-foot house each reach the $2,000 minimum. A 2,700-square-foot house has a $2,700 study fee under the published rate. These are study-fee calculations, not estimates of savings. Include any separately engaged tax implementation and record-reconstruction costs before comparing proposals.

Ask for two depreciation schedules

Have your preparer compare the property with and without the proposed study over the same period. The relevant increase is the difference between those schedules, not every dollar classified into shorter lives. Then ask how much of that difference can reduce tax now, after applicable limitations. A deduction carried forward can have a different timing value from one usable this year.

Use a go, wait or resolve decision

Proceed to a scoped proposal when the basis is supported and the preparer can explain the economics. Wait if the main benefit is years away and the cost would be paid now. Resolve missing records or an anticipated sale before committing. No universal purchase-price cutoff can replace these steps. Bring your closing statement, land allocation, rental start date and existing schedule to discovery.

Continue with your property decision