Apartment buildings hide millions in accelerated depreciation.

Most multifamily properties reclassify 20–30% of depreciable basis. Garden-style apartments with abundant landscaping, surface parking, and pools tend toward the higher end. High-rise concrete buildings tend toward the lower end.

Syndicators routinely commission cost segregation studies in year one to push large losses to LP investors via K-1. Each LP's losses are passive or non-passive depending on their tax status. Bonus depreciation under OBBBA significantly boosts year-one returns.

To use the loss against W-2 income, generally yes — Real Estate Professional status under §469(c)(7) plus material participation. Otherwise losses are passive and offset other passive income, carrying forward to future years.

Cost segregation works best when the property is in service. For ground-up new builds, the study should be commissioned when the certificate of occupancy is issued — and ideally engineered alongside the construction documents for cleanest results.

5-year personal property is subject to §1245 recapture at ordinary rates. However, the time-value-of-money benefit of accelerating deductions almost always outweighs eventual recapture, especially if you plan to 1031 exchange or hold long-term.