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.

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. Those facts generally decide whether a loss can be used against active income in the current year or held 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 this short-term rental study was quoted at $1,295. Against $174,905 of first-year deductions, that is roughly 135 times the fee. It is one result on a small fee, not a typical one. On larger commercial buildings the dollar figures are much bigger and the multiples much smaller: our four commercial benchmark runs came in between 24 and 67 times the fee.

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 before they know whether they can use the deduction 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.

We screen for this before we quote. If the test for using the loss this year is not met, we will say so before you pay anything.

Why owners pick Basis

Most cost segregation firms sell one kind of study, so that is the one they recommend. We sell two, both engineered, and we will tell you which one your building needs.

• Two tiers, and the building decides. The budget tier is a remote study by our engineering team, built from your photos and documents with no site visit, for simpler properties at the lower fee. Bigger or more complex buildings get the full tier, which adds individualized engineering review. Either way, a 70-plus page report and audit support come with 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 the test for using the deduction this year is not met, 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, not a typical one. It is a short-term rental on a small fee, which is why its multiple is higher than the commercial benchmark runs. Commercial buildings produce far larger dollar figures and much smaller multiples. Across four commercial benchmark runs, 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. Whether the loss can be used against other income this year is a question for the owner's CPA.

What made this property a good candidate?

Three things. It was run as a short-term rental with the owner materially participating. Those facts generally decide whether a loss can be used against active income in the current year or held until sale. 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.