A cost segregation study splits a purchase into its parts, so pieces with a short tax life can be deducted faster. With 100% bonus depreciation back for property acquired after January 19, 2025, that can mean a large first-year deduction on a furnished rental. This calculator shows the federal year-one effect, what the IRS takes back when you sell, and the Kentucky wrinkle.
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How to read the results
The default way to depreciate a building is as one lump over 27.5 years for a regular rental or 39 years when the average stay is 30 days or less. The study moves a share of the building, often 20 to 30 percent, into 5, 7, and 15 year buckets. Bonus depreciation lets those buckets come off in year one. The calculator subtracts the building depreciation you would have taken anyway, so the extra deduction is slightly smaller than the bucket itself.
This is timing, not free money
When you sell, depreciation is recaptured. Short-life property is taxed as ordinary income, up to 37%, and the building part up to 25%. People manage that by holding a long time, using a 1031 exchange, or taking the deduction in a high-income year. Run the exit with our capital gains and 1031 exchange estimator.
Kentucky does not follow bonus depreciation
Kentucky uses older federal depreciation rules, so the big write-off helps your federal return while your Kentucky return depreciates more slowly. Kentucky's income tax rate is 3.5% for 2026. Your CPA has to track two sets of depreciation.
Can you use the loss?
A paper loss only lowers this year's tax if the passive loss rules let you use it. A short-term rental with an average stay of seven days or fewer and real hands-on hours can qualify, and so can a household where one spouse is a real estate professional. Test yourself with the short-term rental tax qualifier and the real estate professional checker. For the full list of rules of thumb, read the short-term and midterm rental best practices guide, and for the commercial version, our guide to cost segregation on commercial buildings.
Frequently asked questions
Is bonus depreciation really permanent?
The 2025 federal tax law restored 100% bonus depreciation permanently for qualifying property acquired after January 19, 2025. It is not retroactive, and it covers property with a tax life of 20 years or less.
I already own the property. Is it too late?
Often not. A look-back study lets your CPA catch up on depreciation you never took by filing a form called a 3115, with no amended returns. The bonus rate depends on when the property was placed in service.
What does a study cost?
Residential studies commonly run a few thousand dollars. Smaller properties may not justify one, so run the numbers first.
Is this tax advice?
No. Winner Realty is a real estate brokerage, not a CPA firm. Confirm everything with your own CPA.