Compare the year-one deduction with a cost segregation study against straight-line depreciation alone, from your price, land and placed-in-service month.
Written by Bryan Martin, CPA, Managing Partner and Founder of Taxstra. Last updated October 24, 2026. Taxstra is a CPA firm for high income earners, business owners and real estate investors, serving 1,000+ clients in all 50 states.
Year-one deduction with a study vs without one
The starting amounts are a hypothetical example, not typical study results. Replace them with your own records. Educational, not individualized tax advice.
Year one, if 100% applies
Year one without a study$6,667Straight-line on the building basis over 27.5 years, placed in service in July, 5.5 months in year one
Year one with a study (modeled)$105,000Bonus on the assumed short-life share plus straight-line on the rest
Difference in year one$98,333Timing, not free money: the study front-loads deductions you would otherwise take over the recovery period, and recapture applies on sale.
Which rate applies depends on the acquisition date, any binding contract, the placed-in-service date and elections.
Federal tax effect of that difference if fully usable at 37%: $36,383. It is not a projected refund or savings: passive loss, at-risk and excess business loss limits can defer it, and deductions taken now are not available later.
Bonus deduction on the assumed short-life basis, by rate
Rate
Bonus
Year one with a study
Difference
100%
$100,000
$105,000
$98,333
60%
$60,000
$67,000
$60,333
40%
$40,000
$48,000
$41,333
20%
$20,000
$29,000
$22,333
0%
$0
$10,000
$3,333
Short-life basis that bonus does not cover is modeled as 15-year property, the slowest short-life class, so the partial-bonus rows lean low.
Book your free 30-minute tax fit call to talk through your next steps.
Tax planning slots are limited before year-end.
Studies are performed by our cost segregation partner, ETS. The free call covers fit and next steps; whether a study is worth ordering for your property is decided inside a paid engagement.
We run the tax math and coordinate the study with our engineering partner.
Tax planning slots are limited before year-end.
A free 30-minute call with our team about your needs, how we can help, and whether we are a good fit. The fit check and tax math happen inside a paid engagement. Taxstra does not perform studies; Engineered Tax Services, our engineering partner, does.
Worked example
A $500,000 rental placed in service in July, with $100,000 of land and a 25% short-life assumption
An investor buys a residential rental for $500,000, of which $100,000 is land, and places it in service in July. The investor assumes 25% of the building basis is short-life property, applies the 100% bonus rate after confirming the acquisition and service dates qualify, and uses a 37% federal marginal rate.
Inputs
Worked example inputs
Total purchase basis
$500,000
Land included in basis
$100,000
Short-life share of the building
25%
Building recovery period
27.5 years
Placed in service
July
Bonus depreciation rate
100%
Federal marginal rate assumption
37%
Calculator output
Worked example calculator output
Basis excluding land
$400,000
Year one without a study
$6,667
Bonus on the short-life share
$100,000
Year one with a study (modeled)
$105,000
Difference in year one
$98,333
Federal tax effect of the difference if fully usable
$36,383
Without a study, $400,000 of building basis over 27.5 years gives $6,667 for 5.5 months of year one. With a study, $100,000 moves to short-life property and is fully bonused, and the other $300,000 stays on the 27.5-year schedule. The $98,333 difference is timing: those deductions come out of later years, recapture applies on sale, and passive loss, at-risk and excess business loss limits can defer the benefit. It is not a projected refund.
Methodology
How this calculator works
The calculator removes land, splits the building basis into the short-life share you enter and the rest, and compares year one with and without a study. Eligibility, the share and the recovery period are inputs you supply, not conclusions the calculator draws.
Formulas
Basis excluding land = purchase basis minus land.
Months in year one = 12 minus the placed-in-service month plus 0.5 (mid-month convention).
Year one without a study = basis excluding land / recovery years x months / 12.
Year one with a study = short-life share x bonus rate + any non-bonused short-life basis x its first-year 15-year rate + straight-line on the rest of the building.
Tax effect if usable = difference x federal marginal rate.
Assumptions
The short-life share comes from a supported study; the property-type presets are starting points inside published typical ranges, not results.
The bonus rate is chosen from the acquisition, binding-contract and placed-in-service facts, not the study year.
Non-bonused short-life basis is treated as 15-year property: 5.00% in year one, or 1.25% under the mid-quarter convention when placed in service October to December with nothing else placed in service that year.
One flat federal rate applies to the whole difference.
What it ignores
5- and 7-year property, which recovers faster than the 15-year assumption.
Passive activity, at-risk, and excess business loss limits.
State conformity, study fees, depreciation recapture on sale, and time value of money.
Written by Bryan Martin, CPA, Managing Partner and Founder of Taxstra. Last reviewed October 20, 2026.
Educational, not individualized tax advice.
Choose a bonus rate from the facts, not just the year
The restored 100% federal bonus allowance generally applies to eligible property acquired and placed in service after January 19, 2025. Acquisition rules, including written binding contracts, can change the answer. Used-property eligibility, elections, and exclusions still matter.
For qualifying property under the earlier phase-down rules, ordinary rates include 60% for 2024, 40% for 2025, and 20% for 2026. Special categories and transitional elections can differ. This screen does not determine which rule applies to your assets.
Do not select 100% simply because a cost segregation study is completed in 2026. The original acquisition and service dates are relevant when reviewing existing property.
A $500,000 purchase basis containing $100,000 of land leaves $400,000 of building basis before further adjustments. Placed in service in July, a 27.5-year residential rental gets 5.5 months of straight-line depreciation in year one: about $6,667 without a study.
An assumed 25% short-life share moves $100,000 off the 27.5-year schedule. At 100% bonus, year one with a study is that $100,000 plus $5,000 of straight-line on the remaining $300,000, or $105,000. The difference in year one is about $98,333.
At an assumed constant 37% federal marginal rate, that difference is worth about $36,383 only if the whole deduction is usable at that rate. It is timing, not savings over the life of the property, and it is not a projected refund.
The 25% input is hypothetical. We do not treat a property category as proof of the engineering allocation; the presets start inside published typical ranges so you can see how the answer moves.
What must be reviewed before acting
A large deduction may be suspended or have a different tax value than the selected rate suggests. The calculator compares year one with and without a study; a full comparison also needs these omitted factors.
Supported land and building basis, closing adjustments, improvements, and the property's actual placed-in-service history.
An asset-level study and the eligibility of reclassified assets for the chosen treatment.
Basis, at-risk, passive-activity, excess-business-loss, and other applicable limits on using deductions.
Prior depreciation and the correct procedure for any correction or method change.
Study and implementation fees, state conformity, future disposition and recapture, and the time value of accelerated deductions.
Taxstra can discuss study coordination and CPA implementation as separately defined responsibilities. Bring closing statements, depreciation schedules, ownership details, and the next property decision to the engagement.
A provider quote and an engineering conclusion are different from a screening input. We define the tax work, reporting responsibilities, and fees before proceeding.
It starts with a basis amount that includes land, then subtracts the land amount you enter before applying the short-life allocation. Land itself is not depreciable.
Is the 25% allocation a typical study result?
No. It is an explicitly hypothetical starting input. The actual eligible short-life basis must be supported by the property facts and asset classification.
Why is the tax effect not called ROI?
The output compares year one against straight-line depreciation without a study, but it leaves out study fees, the time value of money, state rules, loss limitations, and future recapture. A ratio built from those incomplete inputs would not establish investment ROI.
Can I use this for a property bought years ago?
You can explore basis and rate assumptions, but the tool does not calculate historical depreciation or a Section 481(a) catch-up adjustment. Existing-property implementation needs the old schedules and a review of the applicable correction procedure.
Educational information, not individualized tax, legal, or investment advice. Examples are hypothetical. Your records, tax year, state rules, and engagement scope determine the work required.
Discuss your next decision with Taxstra
A free 30-minute call with our team about your needs, how we can help, and whether we are a good fit. Tax advice, document reviews, and analysis require a paid engagement.
