A Real Delivered Study: $174,905 in First-Year Deductions

This is not an illustration. These are the figures from a cost segregation study Basis delivered on a real Pennsylvania property. The address is withheld for client privacy. Everything else is exactly as it appears in the study.

Reading the two numbers that matter

Two figures on that table look like they should be the same and are not, and the difference is the part most owners find confusing.

$160,242 is the accelerated basis identified. That is the portion of the building the engineer moved out of the long depreciation schedule and into 5, 7 and 15-year lives: the flooring, the decorative lighting, the cabinetry and millwork, the appliances, the equipment-specific electrical and plumbing, and the site work outside. It is 15.4% of the depreciable basis.

$174,905 is the estimated first-year depreciation. It is larger than the reclassified amount because it includes both the accelerated components taken in full under 100% bonus depreciation and the ordinary first-year depreciation on the remaining structure. It works out to 16.8% of basis.

Neither number is cash. They are deductions. At a 37% marginal rate, a deduction of roughly $175,000 is worth about $64,000 of tax not paid, and only if the owner can use the loss in the current year.

Why this property worked

It is worth being precise about why this one produced a strong result, because the reasons are the same reasons another property might not.

• The owner materially participated in a short-term rental. This is the single most important factor and it has nothing to do with the building. Average guest stays under seven days, with the owner running the property rather than a management company, meant the loss was usable against active income in the current year rather than suspended until sale.
• The building was the majority of the basis. Land does not depreciate. Where land is a large share of the purchase price, less of your money is eligible for reclassification at all.
• Built in 2013, with substantial documented finishes. Newer construction with good cost documentation gives an engineer more to work with and a firmer basis for the allocation.
• The timing. 100% bonus depreciation, permanently restored by the One Big Beautiful Bill Act for property acquired and placed in service after January 19, 2025, is what lets the entire reclassified amount land in year one instead of spreading across the shortened schedules.

What the study cost, relative to what it found

We quote every study per property rather than from a rate card, and a short-term rental study of this kind runs right around $2,000. Against $174,905 of first-year deductions, our study returned roughly 84 times its fee. That is characteristic of short-term rentals specifically, where the fee is small. On larger commercial buildings the dollar figures are much bigger and the multiples much smaller, generally in the 20 to 65 times range.

This is also why our guarantee is written as a ratio rather than a dollar amount. Our study identifies at least 30 times its fee in first-year deductions on a short-term rental, or at least 20 times on a commercial property, or it is free.

How the study was produced

Our study was produced by our engineering team and prepared in alignment with the IRS Cost Segregation Audit Techniques Guide, Publication 5653. The delivered report carries a verifiable QR reference and the component-level detail a CPA needs to file it. The owner's part was to send one document. The owner's CPA filed it.

First, can you actually use the deduction this year?

This is the question most firms skip, and skipping it is how owners end up paying for a study that does nothing for them in the current year. A cost segregation study creates a large paper loss. Whether that loss offsets your other income this year depends on you, not on your building.

You can generally use it against active income now if you materially participate in a short-term rental (average guest stay of seven days or less, and you run it yourself rather than handing it to a property manager), if you hold Real Estate Professional status, or if you have passive income to offset. If you own a long-term rental, use a property manager, and have no passive income, the loss is still real but it suspends and releases later, usually on sale. That is a deferral, not a first-year win.

We screen for this before we quote. If your answer is the suspended case, we will tell you, and we will tell you why waiting may serve you better.

Why owners pick Basis

Every other cost segregation firm produces one kind of study, which means every other firm recommends the kind of study it produces. Basis does not produce studies. We source them, which is the only reason we can put both versions of the work in front of you and tell you honestly which one your building actually needs.

• Two real tiers, one honest tradeoff. An engineered study built by our engineering team with full audit representation and errors and omissions coverage, or a faster software-driven study at a lower fee with a thinner engineering paper trail. We recommend engineered by default and we tell you exactly what you give up if you do not take it.
• A minimum ROI, in writing, or it is free. Our study identifies at least 20x its fee in first-year deductions on commercial property, or at least 30x on a short-term rental, or you do not pay for it.
• Your number before you pay anything. Property-specific, modeled from real parcel data, not a slider on a calculator.
• We will tell you no. If you cannot use the deduction this year we say so before we quote you, not after you have paid.

Read the full comparison, including where the big national firms beat us »

Frequently asked questions

Is this a typical result?

It is a real result on one real property, and it is a short-term rental, which is the property class where the ratio of benefit to fee is highest because the fee is small. Commercial buildings produce far larger dollar figures and much smaller multiples. Across four real engineered commercial studies, first-year deductions ran 16.1% to 21.4% of building basis. Individual results vary.

Why is the address not shown?

Client privacy. Every figure on this page is taken directly from the delivered study. The property is a single-family residential rental in suburban Montgomery County, Pennsylvania.

Does the owner get this as cash?

No. The $174,905 figure is a deduction, not a refund. What it converts to in cash depends on the owner's marginal rate and on whether the loss can be used against other income this year. At a 37% marginal rate a deduction of that size is worth roughly $64,000 of tax that is not paid, assuming the loss is usable.

What made this property a good candidate?

Three things. It was run as a short-term rental with the owner materially participating, so the loss was usable against active income in the current year. It was built in 2013, so the finishes, fixtures and site work were substantial and well documented. And the building carried the large majority of the basis, with land a comparatively small share.

Sources

» Internal Revenue Code Section 168(k), additional first-year depreciation
» IRS Cost Segregation Audit Techniques Guide (Publication 5653)
» IRS Publication 946, How To Depreciate Property
» Treasury Regulation §1.168(i)-8
» IRS Form 3115, Application for Change in Accounting Method
» Hospital Corporation of America v. Commissioner, 109 T.C. 21 (1997)
» Submarket rent, capitalization rate, and vacancy figures compiled by the Basis property data engine from CBRE, Cushman & Wakefield, Newmark, and Colliers market reports. See Sources & Citations.