SFR investors routinely discover five figures in Year 1 federal income tax savings on properties they assumed only offered straight-line depreciation. The minimum is $200,000.
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Single-family rental investors are the most underserved segment in cost segregation — and the most surprised when they see what is available.
The misconception is simple: a rental house is a simple building, so there cannot be much to study. Every single-family rental contains 5-year personal property — carpeting and flooring, appliances, window treatments, ceiling fans, specialty lighting, security systems. The site contains 15-year land improvements: driveway paving, landscaping, exterior lighting, fencing.
On an $800,000 single-family rental, this typically represents $80,000–$160,000 in accelerated first-year deductions. At 37%, that is $30,000–$59,000 in federal income tax savings in the year of acquisition.
The lookback opportunity adds to it. The IRS allows you to go back and claim deductions you never took on prior-year properties using a Form 3115 change in accounting method — without amending previous returns. Some SFR portfolio investors have recovered $500,000–$800,000 in catch-up deductions in a single tax year. We partner with a trusted CPA specialist who handles the Form 3115 filing.
These are the IRS-verified asset classes under Rev. Proc. 87-56 and supporting case law — confirmed across 16,000+ studies. Every component is documented to its correct recovery period with engineering justification, defensible under IRS examination.
Cost Seg America engineers single-family rental cost segregation studies on properties throughout all 50 states. The 5-year personal property in a single-family rental — flooring, appliances, lighting fixtures, security systems — is present in every property. The 15-year land improvements — driveway, landscaping, exterior lighting, fencing — are measurable on every site. Our engineering team documents both.
The IRS publishes a 347-page Audit Technique Guide on cost segregation. It identifies Approaches 1 and 2 as the preferred methodologies. Studies priced under $2,900 recover $60,000–$150,000 less per $1 million of depreciable basis than a fully engineered study. Cost Seg America has used IRS Approaches 1 and 2 on every study for 24 years. 125+ IRS audits. Zero losses. $0 ever returned. The methodology is why.
Cost segregation is an IRS-approved engineering analysis that reclassifies components of your single-family rental from the default 27.5 yr straight-line depreciation schedule to three shorter recovery periods: 5-year personal property, 7-year personal property, and 15-year land improvements. Every component that qualifies for an accelerated schedule is individually identified, measured, and documented.
With 100% bonus depreciation active under OBBBA for property placed in service after January 19, 2025, every qualifying 5-year, 7-year, and 15-year component can be fully deducted in Year 1. Cost Seg America consistently recovers $60,000–$150,000 more in deductions per $1 million of depreciable basis than studies priced under $2,900.
The typical reclassification rate for single-family rental is 20–30% of the depreciable basis. On an $800K property, this translates to approximately $59,200 in Year 1 federal income tax savings at a 37% rate. Actual results vary based on the specific property, construction type, and individual tax situation.
The One Big Beautiful Budget Act (OBBBA) restored 100% bonus depreciation for qualified property placed in service after January 19, 2025. With 100% bonus depreciation, every qualifying 5-year, 7-year, and 15-year component identified in your study is fully deductible in the year you place the property in service. Your CPA determines your eligibility based on your individual tax situation, passive activity rules, and other factors.
Yes — and this is one of the most powerful opportunities in SFR cost segregation. The IRS allows you to go back and claim deductions you never took on prior-year properties using a Form 3115 change in accounting method — without amending previous returns. For investors who own multiple SFR properties, this is often the largest single federal income tax event of their career. Some portfolio investors have recovered $500,000–$800,000 in catch-up deductions in a single tax year. We partner with a trusted CPA specialist who handles the Form 3115 filing.
Cost Seg America's minimum qualifying property value is $200,000. Below this threshold, the engineering cost typically exceeds the tax benefit. Above $200,000, the fee-to-benefit ratio is consistently favorable and grows substantially with property value. For SFR investors with multiple properties, portfolio-wide studies often deliver the strongest results.
Unlimited audit defense means if the IRS examines your cost segregation study — this year, five years from now, or ten years from now — Cost Seg America responds. Written responses and phone representation. No time limit. No hour cap. No additional fee. Ever.
In 24+ years and 125+ IRS audits, Cost Seg America has never lost an audit and has never returned a dollar to the IRS.
Cost Seg America doesn't just find the deductions — we document them to survive the most demanding IRS examination.