$116K Reclassified on a Fourplex in Montana
A returning USTAGI client, referred back by their CPA, has owned this fourplex in Montana since January 2024. It was built in 1950 and cost $633K, with $127K allocated to land, leaving a depreciable basis of $506K.
- Purchase price
- $633K
- Depreciable basis
- $506K
- Reclassified
- $116K
- Share of basis
- 23%
The property and the result
For a property of this size, USTAGI used its modeling approach, built for 1 to 4 unit residential properties with a building basis under $1M. It costs much less than a full engineering study, and no site visit is needed. The look-back study for the 2025 tax year moved $101K into 5-year property and $15K into 15-year property, a total of $116K or 23% of the basis.
The owner can claim the depreciation missed since 2024 on the 2025 return, without amending past returns. Smaller properties are where an affordable study matters most, and this result is close to the 24.8% median across USTAGI's multifamily studies.
How the purchase price was allocated
| Category | Amount | Share of price |
|---|---|---|
| Land (not depreciable) | $127K | 20% |
| 5-year property | $101K | 16% |
| 15-year property | $15K | 2% |
| Remaining 27.5-year building basis | $390K | 62% |
How it compares: this study reclassified 23% of the depreciable basis. Across 300 multifamily studies USTAGI has completed, the median is 24.8%.
How the study was done
- Study type
- Modeling study
- Inspection
- Modeling study, no site visit required
- Cost data
- RSMeans construction cost data
- Timing
- Look-back study for the 2025 tax year
- Placed in service
- January 2024
- Depreciation before the study
- 27.5-year residential rental
- Year built
- 1950
- Client
- Returning client referred by their CPA
What typically qualifies on a property like this
The study assigns each component of the building and site to its IRS recovery period. On a fourplex, these are the kinds of items that usually move off the 27.5-year schedule.
5-year property
- Carpet, vinyl and other removable flooring
- Kitchen cabinets, countertops and appliances
- Decorative and accent lighting
- Window treatments and millwork
- Dedicated electrical and plumbing for appliances and laundry
15-year property
- Parking lots, curbs and sidewalks
- Landscaping and irrigation
- Site lighting and fencing
- Pools, playgrounds and outdoor amenities
- Site drainage and signage
What this means at tax time
Because the property was placed in service in January 2024, the owner had been depreciating the entire building over 27.5 years. The study identified the components that belonged on 5- and 15-year schedules from the start.
Through a change in accounting method, generally filed on IRS Form 3115 with the 2025 return, the owner can claim the depreciation missed in earlier years as a single adjustment in the current year, without amending past returns.
The bonus depreciation rate that applies, if any, depends on when the property was acquired and placed in service, not on the year of the study. The owner's CPA applies the rules in effect for that date.
Questions about this case study
Often, yes. USTAGI's modeling approach for 1 to 4 unit residential properties costs much less than a full engineering study. On this fourplex it reclassified $116K, 23% of the basis.
It is a cost estimate method for residential 1 to 4 unit properties with a building basis under $1M. It typically delivers results comparable to a detailed engineering study at a fraction of the cost. Eligibility is decided case by case.
Yes. This owner placed the fourplex in service in 2024 and ordered the study for 2025. Missed depreciation is caught up through an accounting method change on the current return.
Yes. The study looks at the components in place when the owner placed the property in service, whatever the building's age.
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Results shown are from a completed USTAGI cost segregation study and are not a guarantee of future results. The client is not named, the location is shown by state and amounts are rounded. “Reclassified” is the depreciable basis the study moved into 5, 7 and 15-year property; it is not a tax-savings figure. Outcomes depend on each property and each owner’s tax situation. Consult your tax advisor about your situation.