Frequently Asked Questions

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.

Converting a rental or business property to personal use doesn't itself trigger bonus depreciation recapture. In the year you convert, you simply stop depreciating the property, and no gain, loss, or recapture is reported just for the conversion. Later, when you sell, the bonus (and other depreciation) you claimed earlier reduces your basis, so more of the sale price becomes taxable gain.

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For personal property components (like furniture and fixtures), that depreciation is generally recaptured as ordinary income under Section 1245. For the building and qualifying land improvements, bonus counts as accelerated depreciation, so the excess over straight line depreciation is recaptured as ordinary income under Section 1250, and any remaining gain is taxed as unrecaptured Section 1250 gain at up to 25%. The period the property was held for personal use in between doesn't prevent this recapture, it all happens at the time of sale if there's gain.

It depends on the facts, specifically how long guests typically stay. Many STRs are treated as residential rental property (27.5 years) when they meet the definition of a dwelling unit used for rental; however, if most stays are under 30 days, the property is treated as nonresidential (39 years) instead. The correct life requires reviewing your actual rental/booking history with your CPA.

In cost segregation, components are typically reclassified from 27.5/39-year real property into shorter-life buckets: 5-year (personal property, e.g., certain removable finishes/equipment), 7-year (some personal property categories depending on use/class life), and 15-year (land improvements, e.g., parking lots, sidewalks, landscaping/irrigation, site lighting, fencing). The exact breakdown depends on the engineering analysis and asset details.

Yes, here's the partners page with details: https://www.recostseg.com/partners

Depreciation recapture rules are complex and depend on the type of property, holding period, and transaction structure. Here's a detailed explainer: https://www.recostseg.com/post/depreciation-recapture-explained