The Journal
Field notes for residential investors and their CPAs, plain-spoken essays on the tax law, the methodology, and the strategy of accelerated depreciation for residential property.
Does your state follow federal bonus depreciation? Why your cost seg deduction can shrink on the state return.
Federal bonus gives a full year-one write-off — but many states decouple and add it back. What state conformity does to your cost seg deduction, why the reclassification still helps, and a worked $500K example.
Read the essay →Cost segregation on a mid-term rental: why the 30-day guest changes how you use the deduction.
Rents like a short-term rental, taxed like a long-term one. A 30-plus-day average stay fails the seven-day test, so the loss is passive — what a study still delivers on a mid-term rental, with a worked $520K example.
Read the essay →Cost segregation on a vacation home you use yourself: how personal-use days change the math.
You block off the beach condo two weeks a year and rent it the rest. Personal-use days decide whether a study creates a loss now or a carryforward — the Section 280A 14-day/10% rule, with a worked $600K example.
Read the essay →What a cost segregation study actually reclassifies: the 5-, 7-, and 15-year buckets in a residential rental.
Residential rentals crawl along a 27.5-year clock. A study moves qualifying components into 5-, 7-, and 15-year buckets — carpet and appliances, furniture, driveways and landscaping. Exactly what reclassifies, what never does, and a worked $500K example.
Read the essay →Land value allocation and cost segregation: why the land split sets your ceiling.
Land isn't depreciable, so the land-versus-building split sets the ceiling on everything a study can accelerate. How to support a defensible allocation instead of defaulting to the assessor ratio, with a worked $500K example.
Read the essay →Cost segregation after a 1031 exchange: how the carryover-basis split changes the math.
A like-kind exchange splits your replacement property into carryover basis and excess basis, and only the excess basis is bonus-eligible. What a study can and can't accelerate after an exchange, with a worked $480K example.
Read the essay →Converting your home to a rental: does cost segregation still pay?
You convert a former home to a rental, run a study, and expect the 100% write-off, then learn the acquisition-date rule says otherwise. Why bonus usually will not apply to the building, what a study still accelerates, and a worked $360K example.
Read the essay →Cost segregation for passive investors: what happens to the losses.
No REPS, no STR loophole, so the deduction can't touch your W-2. But suspended passive losses aren't lost: they bank on Form 8582, absorb passive income while you hold, and release in full when you sell. A worked $450K example.
Read the essay →Real estate professional status: who qualifies, and what it unlocks.
The STR loophole gets the attention, but long-term landlords have their own path to using cost-seg losses against W-2 income: real estate professional status. The 750-hour test, the grouping election, and a worked $640K example.
Read the essay →Depreciation recapture: what happens when you sell.
“Doesn't the IRS just claw it all back?” Not quite. Cost seg concentrates recapture in the reclassified slice — §1245 personal property, with land improvements under the §1250 rules — and it's the slice a step-up can erase, and good exit planning can defer. The two rates, with a worked $525K example.
Read the essay →What documents do you actually need for a cost segregation study?
A residential study runs on a handful of documents you already have, the settlement statement, the land/building split, and your depreciation schedule. The full list, why each matters, and why there's no site visit.
Read the essay →Should you do a cost segregation study the year you buy, or wait?
The default is the first year the property is placed in service, but waiting can make sense. The time-value math, the exceptions, and how to decide.
Read the essay →Bonus depreciation vs. Section 179 for residential rentals.
Both expense rental assets up front, but only bonus depreciation can create a loss, while Section 179 caps out at your business income. The rule that decides which fits, with a worked $92K example.
Read the essay →Material participation for a short-term rental: the documentation to keep.
The STR strategy lives or dies on material participation. The 100-hour and 500-hour tests, the catch where your cleaner's hours count against you, and the contemporaneous log that holds up, with a worked $55K example.
Read the essay →The five short-life assets STR owners almost always under-claim.
Furniture, appliances, decor, technology, and the hot tub out back are 5- and 15-year property, and most STR owners leave them on the 27.5-year clock. The five most-missed, with a worked $74K example.
Read the essay →Cost segregation on a duplex or small multifamily: the numbers.
A duplex usually reclassifies more of its basis than a single-family, and the study costs the same flat fee. A worked $685K example, the per-unit math, and when it pencils.
Read the essay →Is cost segregation an audit risk? Audit-ready vs. audit-proof.
No study is “audit-proof”, and the word is a red flag. What audit-ready actually means, why a study doesn't by itself raise your odds, and the documentation that holds up if the IRS asks.
Read the essay →What a cost segregation study actually costs for a residential rental.
Real pricing on a residential study, why it costs far less than a five-figure commercial one, and a dollar-by-dollar look at whether the fee actually pays for itself.
Read the essay →Do you really need a site visit for a residential cost segregation study?
For most 1-4 unit rentals and STRs, a physical walk-through isn't required and rarely changes the result. What we use instead, and why the study is still audit-ready.
Read the essay →A CPA's quick reference: when residential cost segregation is worth recommending.
The four variables that decide whether a study pencils (basis, marginal rate, holding period, and usability) a property-value rule of thumb with a worked example, and the cases where it's better to skip it.
Read the essay →The short-term rental loophole, explained without the YouTube fluff.
A long-standing IRC §469 rule lets STR owners deduct cost-seg losses against W-2 income, if material participation holds up. Here's what the YouTube version glosses over.
Read the essay →100% bonus depreciation is back. Here's what it means for your next residential acquisition.
The OBBB restored 100% bonus depreciation for property acquired (contract signed) and placed in service after January 19, 2025. Here's how it changes the math.
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