If you own rental property in Florida one of the biggest advantages you have as a real estate investor or rental property owner is the tax code. And few strategies unlock more tax savings than a cost segregation study. Instead of waiting nearly three decades to fully depreciate your rental property asset, cost segregation allows you to accelerate those deductions, front-loading your tax benefits, freeing up cash flow, and helping you reinvest faster.
But here’s the million-dollar question investors across Florida ask: “Is a cost segregation study right for my rental property?” In this post, we’ll break down what a cost segregation study is, which properties qualify, when to do it, how much it costs, the potential savings, and the risks you need to know before moving forward.
What is a Rental Property Cost Segregation in Florida?
A cost segregation study is a strategic tax analysis that breaks down the total cost of your rental property into separate components. Instead of depreciating the entire property over the standard 27.5 years (for residential rental) or 39 years (for commercial), a cost segregation study allows certain portions to be depreciated much faster—typically over 5, 7, or 15 years.
As a professional Orlando property management company managing hundreds of properties in the greater Orlando area, here the most common categories for a cost segregation:
Building Structure (27.5-Year Property)
- Load-bearing walls
- Foundation & structural components
- Roof framing and main building shell
5-Year Property (Personal Property / Short-Life Assets)
- Appliances (refrigerators, dishwashers, microwaves, stoves, washers/dryers)
- Flooring (carpet, vinyl, certain tile if easily removable)
- Cabinetry & millwork (kitchen cabinets, bathroom vanities)
- Lighting fixtures (interior decorative fixtures, ceiling fans)
- Window treatments (blinds, shades, drapes)
- HVAC equipment (split systems, ductwork serving specific areas)
- Plumbing fixtures (sinks, faucets, water heaters—not main piping)
- Electrical (dedicated outlets for appliances, low-voltage wiring, specialty lighting)
7-Year Property
- Office furniture or rental office equipment (for multifamily or mixed-use)
- Shelving or movable partitions
15-Year Property (Land Improvements)
- Driveways & parking lots
- Sidewalks & curbs
- Landscaping & irrigation systems
- Fences & gates
- Retaining walls
- Outdoor lighting
- Recreational areas
This breakdown is what allows a cost segregation study to front-load depreciation and dramatically boost deductions in the first few years.
Which Florida Rental Properties Qualify?
Any income-producing property can qualify, single-family rentals, multifamily, and commercial buildings. It’s most effective on properties worth $250,000 or more, but even smaller properties may benefit, especially when combined with bonus depreciation. Renovations and improvements can also be included.
When is the Best Time to do a Cost Segregation Study?
The best time to do a cost segregation study is as soon as possible after purchasing or renovating your rental property, ideally within the first tax year. Acting early allows you to take full advantage of 100% bonus depreciation, made possible by the Tax Cuts and Jobs Act (often referred to as President Trump’s “Big Beautiful Bill”). This powerful incentive lets you write off qualifying components in the very first year, significantly reducing your taxable income and boosting cash flow. Even if you’ve owned the property for a few years, you can still “catch up” by filing a change in accounting method (Form 3115) and claiming those missed deductions in one lump sum—no need to amend prior returns.
How Much Does a Cost Segregation Study Cost in Florida?
A professional cost segregation study usually ranges from $3,000 to $10,000, depending on property size and complexity. The key is making sure the projected tax savings far exceed the upfront cost, which is often the case for higher-value properties.
What are the Potential Savings?
The savings can be significant, often tens of thousands of dollars in the first year alone. By moving items into 5-, 7-, and 15-year depreciation schedules (and using 100% bonus depreciation when available), investors can front-load deductions and free up immediate cash flow.
Real-World Example of a Cost Segregation Study:
Let’s say you purchase a $300,000 single-family rental property in Orlando. Normally, the IRS requires you to depreciate the building value evenly over 27.5 years, that’s roughly $10,900 in depreciation deductions per year.
With a cost segregation study, the property is broken down into faster-depreciating components:
- Appliances, carpet, and cabinets (5–7 years)
- Driveway, landscaping, fencing (15 years)
- Structure and walls (27.5 years)
By accelerating those deductions, you might shift $60,000–$80,000 worth of components into the 5-, 7-, and 15-year buckets. Combined with 100% bonus depreciation, you could deduct a large portion of that in year one, often generating a $20,000+ tax write-off immediately, instead of waiting almost three decades.
What are the Risks of a Cost Segregation Study in Florida?
The main risks are higher upfront costs, more complex tax filings, and depreciation recapture when selling (which means some deductions get taxed later). There’s also a slightly higher chance of IRS scrutiny, but when performed by a qualified professional, cost segregation studies are fully legitimate and widely used.
Orlando Property Managers: Florida Cost Seg Summary
So, should you do a cost segregation study on your rental property? The short answer is YES! But it also depends on your property type, holding period, and overall tax situation. For many Florida investors, especially those with higher-value rentals in Orlando, multifamily units, or expanding portfolios across Central Florida, the savings can be substantial, sometimes worth tens of thousands of dollars in just the first year.
Contact Us today if you are interested in learning more about a cost segregation study for your rental property. At The Listing Real Estate Management, your local boutique Orlando property managers, we’re here as a resource to you and your rental investment property.
