Cost Segregation on Small Rentals

Cost segregation on small rentals is a costly overhyped strategy. While cost segregation accelerates depreciation on commercial real estate, the $5,000-$15,000 engineering study cost makes it pointless for single-family rentals under $500,000, where the tax benefit barely exceeds the study fee. For a $300,000 rental property, the typical benefit is just $2,000 over five years—30% less than the average study cost. This ranks below #2 (LLC myth) in practical value, as LLC deductions at least avoid upfront fees.