Frequently Asked Questions

Yes, DST-sponsored real estate commonly uses cost segregation at the property level, with benefits allocated to investors based on offering structure and individual circumstances. The exact investor impact depends on allocations and the investor's tax profile.

Truck repair facilities can be good candidates for cost segregation (often with meaningful 5-, 7-, and 15-year components). Placed-in-service timing matters for bonus depreciation, so confirming when the new building/assets were placed in service is key.

Bonus depreciation under Qualified Production Property works a bit differently than what most people expect from cost segregation. QPP doesn't reclassify the building into a shorter recovery period the way QIP does, it stays 39 year nonresidential real property. Instead, Section 168(n) grants 100% bonus depreciation directly to that 39 year property itself, as long as it's used as an integral part of a qualifying production activity like manufacturing, production, or refining, placed in service after July 4, 2025 and before January 1, 2031.

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Cost segregation still matters here because most production facilities are mixed use, with office space, admin areas, and parking that don't qualify, so you need a reasonable allocation between eligible and ineligible square footage, and the IRS has specifically named cost seg data as acceptable support for that allocation. One thing to flag: there's a 10 year recapture window if the property changes use within that period, so this isn't a "take the deduction and forget it" provision the way some other bonus depreciation property is.

Often, the preferred method to "catch up" missed depreciation (including from cost seg) is a look-back study with a Form 3115 accounting method change rather than amending prior returns. Whether an amendment is allowed/advisable depends on timing and facts, but many taxpayers use 3115 for missed depreciation.

Sometimes. Many STRs are reported on Schedule E, but if substantial services are provided to guests (more hotel-like operations), reporting can shift (often discussed as Schedule C vs Schedule E). The correct treatment is facts-dependent and should be confirmed with the tax preparer.

Our position is that the classification depends on actual rental day patterns, not on the type of property or platform used. The tax code only treats a unit as residential (27.5 year) if it qualifies as a dwelling unit, and a unit fails that test if it's used on a transient basis, meaning more than half the days it was rented out during the year went to stays under 30 days.

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Since a single Airbnb or VRBO unit is its own unit, that threshold is easy to cross: if your bookings are mostly short stays, the property lands on the 39 year nonresidential side regardless of how residential it looks. The inconsistent treatment you've seen out there usually comes from preparers defaulting to 27.5 because the property is a house, without actually checking the booking calendar. Our approach is to look at your actual rental days for the year and classify based on that, then confirm the final position with your CPA.

Often, yes. If you own an interest in real property via a TIC structure, you generally still have a depreciable interest and may be able to benefit from cost segregation, subject to your share of basis, how the TIC is structured, and your tax situation. Details should be reviewed to confirm eligibility and allocations.

You take the federal position regardless of what the county has on file. Federal depreciation recapture follows the federal tax classification of the asset, not how the local assessor labels it for property tax purposes. If your cost segregation study identified components as 1245 property, those get recaptured as 1245 personal property on sale, and the building components stay 1250, no matter what the county's records say. The two systems serve different purposes and don't need to match.