For a short-term rental in the 32% federal bracket or higher, cost segregation is almost always net-positive above $300,000 purchase price when you use the $99 DepreciMax estimator, and above $600,000 when you commission a full $5,000+ engineered study. The math: purchase price × bonus-eligible percentage × federal marginal rate = Year-1 federal tax savings. STRs run 17-19% bonus-eligible on average, so a $500K property at 37% delivers roughly $32,000 in Year-1 federal savings — well above any study cost. Below $300K, or in the 12-22% brackets, the math is tighter and often only the $99 tier clears break-even.
The break-even formula
Year-1 tax savings = Purchase price × Bonus-eligible % × Federal marginal rate — then subtract the study cost. If the result is positive, the study pays for itself in Year 1.
Three variables. Two are outside your control (purchase price is fixed once you buy; federal marginal rate is your bracket). The one you influence is your bonus-eligible percentage — driven by property age, finish quality, land-value ratio, and amenity mix. Well-furnished, amenity-rich STRs cluster around 17-19%. Trophy coastal single-family properties with high land value (Newport Beach, Nantucket) can drop below 10%. Cabin/mountain rentals with fresh 5-year FF&E frequently hit 22-28%.
Break-even table by price and bracket
The table below assumes an 18% bonus-eligible percentage (the DepreciMax average across 3,000+ STR reports) and a $99 study cost. "Net Y1 savings" = tax savings minus $99. Green cells clear break-even by 20× or more. Yellow cells clear break-even but with less margin. Red cells fail break-even.
| Purchase price | Bonus-eligible @ 18% | Y1 savings @ 22% | Y1 savings @ 32% | Y1 savings @ 37% |
|---|---|---|---|---|
| $300,000 | $54,000 | $11,880 | $17,280 | $19,980 |
| $500,000 | $90,000 | $19,800 | $28,800 | $33,300 |
| $750,000 | $135,000 | $29,700 | $43,200 | $49,950 |
| $1,000,000 | $180,000 | $39,600 | $57,600 | $66,600 |
| $1,500,000 | $270,000 | $59,400 | $86,400 | $99,900 |
| $2,000,000 | $360,000 | $79,200 | $115,200 | $133,200 |
All figures assume 100% bonus (property acquired and placed in service after January 19, 2025 per OBBBA). At the pre-OBBBA 40% rate, multiply the Y1 savings by 0.40 — most cells still clear the $99 threshold.
Same table, but with a $5,000 engineered study
Full engineered cost segregation studies typically cost $3,000-$15,000 depending on complexity. At the mid-range $5,000 cost, break-even shifts. Green cells still clear; yellow cells barely clear (Y1 savings 1-3× study cost); red cells fail.
| Purchase price | Y1 net @ 22% (after $5K study) | Y1 net @ 32% | Y1 net @ 37% |
|---|---|---|---|
| $300,000 | $6,880 | $12,280 | $14,980 |
| $500,000 | $14,800 | $23,800 | $28,300 |
| $750,000 | $24,700 | $38,200 | $44,950 |
| $1,000,000 | $34,600 | $52,600 | $61,600 |
| $1,500,000 | $54,400 | $81,400 | $94,900 |
| $2,000,000 | $74,200 | $110,200 | $128,200 |
Full engineered studies deliver more defensible documentation on audit, but on a bonus-eligible basis, a $99 DepreciMax report yields the same Year-1 deduction as a $5,000 study for most STRs under $2M. The value gap opens on commercial properties, mixed-use buildings, and STRs with complex mechanical systems — where an engineer walk-through can identify additional 5-year assets that photo-analysis misses.
Plug the exact bonus-eligible % into the formula.
The tables above use the 18% dataset average. Your specific property could run 12% or 28% depending on age, finishes, and land ratio. A DepreciMax Property Report returns the calibrated number for the address so you can rerun the break-even for real.
Run a Property Report — $99 →State add-back doesn't kill it — but it does shrink it
The formula above delivers federal savings. State savings are on top for conforming states (about 30 jurisdictions include the 4 no-tax states), or zero for decoupled states in Year 1. The federal number does not change based on your state; only the state stacked savings differ.
Worked example: a $750,000 STR in Tennessee (no state income tax) vs the same property in California (decoupled, 13.3% top rate). Federal Year-1 savings on a $135,000 bonus-eligible base at 37% federal are $49,950 in both places. Tennessee adds $0 in state savings. California would add $17,955 if it conformed — but doesn't, so California is also $0 in Year-1 state savings. Both investors still clear the $99 study cost by 500×.
Every decoupled state allows normal MACRS state depreciation over the property's regular class life. Over the hold period, total state depreciation matches federal — only the timing is different. See our state add-back forms walkthrough for the mechanic.
When cost seg is NOT worth it
Three scenarios where the math flips:
1. Under $250K purchase with a $2K+ study cost
At $250K purchase × 18% bonus-eligible × 32% marginal rate = $14,400 Year-1 federal savings. Net of a $2,500 study: $11,900. Still positive — but the ratio of study cost to savings shrinks. If you're in the 22% bracket instead of 32%, the same property nets only $7,400 after study cost. The $99 DepreciMax tier still clears easily. A full engineered study rarely does at this price point.
2. Low federal marginal rate (12% or 22%) without itemizing
If your total AGI puts you in the 12% or 22% federal bracket, the tax savings from bonus depreciation drop proportionally. A $500,000 STR at 22% delivers $19,800 in Year-1 federal savings — still positive against $99, but a full $5,000 study leaves only $14,800 net. Consider timing: cost seg in a low-income year gets you a Year-1 loss carryforward you can use in higher-income future years, but at ordinary loss recovery rates.
3. Short hold with a flat-value exit
Section 1245 personal property depreciation is recaptured at ordinary rates on sale, not the 25% Section 1250 rate. If you sell in 12-24 months at a flat sale price, the Year-1 acceleration reverses at sale via recapture. In appreciating markets the acceleration still wins because appreciation swamps recapture; in flat markets it's a timing wash. Rule of thumb: hold 3+ years and expect at least 8-12% appreciation over that period for cost seg to be clearly net-positive after recapture.
How to run the decision on a specific property
- Get the bonus-eligible percentage. Photos, address, purchase price → a DepreciMax property report returns the calibrated bonus-eligible % based on 5-year, 15-year, and 39-year finish classification.
- Multiply by your federal marginal rate. Look at your last year's 1040 AGI. High-income W-2 STR investors are usually in the 32-37% brackets.
- Subtract the study cost. $99 for DepreciMax; $3,000-$15,000 for a full engineered study.
- Compare against alternative uses of that money. If Year-1 net savings are 5× the study cost or more, cost seg wins. If it's 2-5×, it's still worth doing but marginal. Under 2×, consider whether the audit-defense documentation of a full study justifies the extra cost.
Frequently asked questions
At what purchase price does cost segregation start being worth it?
Cost segregation is generally net-positive on any STR above $300,000 purchase price if you're in the 32% federal bracket or higher and use the DepreciMax $99 report tier. For a full $5,000+ engineered study, break-even shifts higher — usually $600,000+ at 32%, or $400,000+ at 37%. Below $300,000 the timing benefit rarely exceeds the study cost.
How do I calculate my break-even?
Estimated Year-1 tax savings = purchase price × bonus-eligible percentage × federal marginal rate. STRs typically run 17-19% bonus-eligible for well-furnished properties. So a $750,000 STR at 18% bonus-eligible × 37% federal marginal rate = $49,950 in Year-1 federal tax savings. Subtract the study cost. If positive, do the study.
Does state tax add-back kill the ROI?
It shrinks it, but rarely kills it. In decoupled states (CA, PA, NJ, MA, etc.) you lose the Year-1 state savings but not the federal deduction. On the $750,000 example above, a California STR investor still gets the $49,950 federal savings — they just miss the ~$20,000 California state savings. Federal alone is still net-positive against any study cost.
What if I sell in 3 years — is the study still worth it?
It depends on whether the property appreciates enough to offset depreciation recapture. Section 1245 personal property depreciation is recaptured at ordinary rates, not the 25% Section 1250 rate. For a 2-3 year hold, run the math both ways: (1) Year-1 savings at your current marginal rate, versus (2) the recapture hit on sale. In a rising-value market with substantial appreciation, the Year-1 acceleration usually wins. In a flat or declining market, it can be a wash.
Does the study cost affect the deduction I can claim?
No. The study fee is a separate deductible business expense (Schedule E line for professional fees). The §168(k) deduction amount is determined by the property's bonus-eligible components, not what you paid for the study. A $99 DepreciMax estimator and a $15,000 engineered study can yield the same Year-1 §168(k) number — the difference is documentation depth, not deduction size.
When is cost segregation NOT worth it for an STR?
Three scenarios: (1) property under $250K with a study cost above $2K — the math doesn't clear; (2) you're in the 12% or 22% federal bracket and don't itemize — the marginal rate is too low to justify a professional study cost; (3) you're planning to sell within 12 months and expect a low-appreciation exit — recapture eats the Year-1 acceleration. In all three, the DepreciMax $99 tier is the only cost-seg option that clears break-even.
Run the numbers on a specific STR
Enter an address. DepreciMax returns the calibrated Year-1 bonus-eligible dollar amount so you can plug the exact number into the break-even formula above — itemized by IRS category, with the state-recovery schedule for all 51 jurisdictions. $99 per property, no subscription.
Run a Property Report — $99 →Bonus-eligible % base rate: DepreciMax property-report dataset (n=3,000+ STR reports across 197 US markets); average 17.8% bonus-eligible for 5-year + 15-year components on well-furnished STRs.
Federal statute: IRC §168(k) as amended by the One Big Beautiful Bill Act (P.L. 119-21).
Recapture rules: IRC §1245 (ordinary rate on personal property recapture); IRC §1250 (25% cap on real property recapture).
Related: Cost segregation study cost for STRs · 40% vs 100% under the binding-contract rule · State add-back forms walkthrough.
Verified by the DepreciMax Research Team, 2026-09-26. Not tax advice — consult a licensed CPA for filing-specific guidance.