How do you write off a Myrtle Beach condo
faster than 27.5 years?

The short answer

A cost segregation study is an engineering report on your rental. It lists every part of the purchase that is not the building: carpet, appliances, furniture, cabinets, light fixtures. It gives each part a value and a recovery period. The tax rules depreciate the building over 27.5 years, but carpet and appliances over 5 years. Without a study, the whole price is depreciated over 27.5 years. With one, the short-life parts are written off in 5 years, or in full in year one for property acquired after January 19, 2025. An engineer visits the unit, values each part, and writes the report your CPA files. Whether it helps depends on two things: can you use the loss this year, and what recapture costs at sale.

What does a cost segregation study do?

It splits one purchase price into parts with different recovery periods. The building stays on the 27.5-year residential schedule. Everything the study can support as personal property or a land improvement moves to a shorter one.

The periods come from the depreciation rules. Land is never depreciated. A study changes when you take deductions. It does not create new ones. The total over the life of the property is the same either way.

The moved share qualifies for the special depreciation allowance. For property acquired after the date above, that allowance is 100 percent. A furnished unit bought this year can deduct its whole moved share in year one.

How the 27.5-year schedule is set up from the closing statement is on our rental depreciation page.

What does an example look like?

Round numbers, not a local price. A furnished condo costs $400,000. Your CPA sets the land share at $40,000. That leaves $360,000 to depreciate. Without a study, all of it is written off over 27.5 years: about $13,100 a year.

The study finds $60,000 of furniture, appliances, carpet and fixtures. That $60,000 moves to the 5-year class. The unit was acquired after January 19, 2025, so the whole $60,000 is deducted in year one. The remaining $300,000 stays on 27.5 years: about $10,900 a year.

Year one: about $70,900 with the study, $13,100 without. Every later year: $10,900 with, $13,100 without. Over the life of the property the total is the same. At sale, the $60,000 comes back as ordinary income, up to the gain. These are full-year figures. The first year is prorated by month. The share a study finds varies by unit.

How is a study done?

1. Confirm what came with the unit. The purchase contract and the inventory list are the starting point.
2. Hire a firm that does engineering-based studies. Ask for a site visit, photographs and an itemized valuation.
3. Give the firm the closing statement, the inventory and any invoices for furniture or appliances.
4. The engineer visits, lists every short-life part, values each one and assigns its class. The report goes to your CPA.
5. Your CPA files it with the return. If you bought in an earlier year, the CPA files a change of method, and the missed depreciation is taken in one year.

What gets reclassified in a furnished beach condo?

More than in an unfurnished house. A condotel or rental-pool unit is sold furnished. The furniture, appliances, carpet, window treatments and light fixtures are inside the purchase price. All of them are short-life property. The study documents what they are worth.

Two things are different in a condo. You own no site improvements directly, only a share of the common elements, so the 15-year class is mostly out of reach. That share also includes the land under the building. How the land part of a condo purchase is split is a question for your CPA. Ask it before the study is ordered.

What comes with the unit is a contract question first. Our Myrtle Beach condo investing page covers what furnished sales here include. The purchase contract should list it.

Can you use the deduction?

A study produces a large first-year loss. Rental losses are passive by default. A passive loss can only reduce passive income, unless you pass the material participation tests. An owner with a full-time job and a managed unit can order a perfect study and get a loss that cannot be used this year.

The test is separate from the study and comes first. Our short-term rental tax treatment page explains the seven-day average stay rule, the seven participation tests, and the records to keep. Read it before you pay an engineer.

A loss you cannot use this year is not lost. It carries forward to next year. There it offsets passive income, which includes the rent from this unit and from any other rental you own. You do not have to wait for a sale. Whatever is still unused when you sell the whole property in a taxable sale is released in that year.

What comes back when you sell?

When you sell the reclassified items, gain up to the depreciation you took is taxed as ordinary income. That is the recapture rule for personal property. It is not taxed as capital gain. The faster you wrote it off, the more comes back at ordinary rates.

The building is treated differently. Depreciation on the structure comes back as gain taxed at up to 25 percent under the capital gains rules. Most other long-term gain is taxed at 15 percent or less. A sale after a study therefore has two recapture layers. Ordinary rates on the short-life items. Up to 25 percent on the building.

A 1031 exchange defers all of it. Owners who plan to keep trading up treat the study and the exchange as one decision. The steps are on our 1031 exchange page. An owner who plans to sell and cash out in three or four years should run the recapture numbers before ordering a study.

When should you order a study?

Four things settle it. Can the passive rules let you use the loss this year? How much of the price is furniture, appliances and finishes? How long will you hold, since a quick sale returns the benefit as recapture? What does the study cost against all three? The cost varies by provider and property. Get a quote before you decide.

Quality matters. The audit guide that examiners use to review these studies states that the classification of building parts is factually intensive and must be supported. It lists what a good study contains. Someone with expertise and experience. A detailed description of the method. Supporting documents. Interviews with the right people. A site visit.

An estimate made from a purchase price and a percentage is not a study. It has no site visit and no support. That is the kind that fails a review.

What should you settle before you buy?

The facts a study uses are knowable before closing. We check what comes with the unit, whether the building requires a rental pool, and how the management is set up. Those are property questions and we answer them before you offer.

The tax answer is whether a study is worth the cost and what the recapture looks like on your timeline. For that we can put you with a CPA who works on beach condos locally. That conversation goes faster with the building facts already settled.

Common questions

Cost segregation FAQ for Grand Strand investors

Does cost segregation create new deductions?

No. It changes when you take them. The total depreciation over the life of the property is the same with or without a study. More of it lands in year one.

Can I use the loss against my salary?

Only if the property is outside the passive rules and you materially participate. A managed unit owned by someone with a full-time job usually cannot. The loss carries forward and offsets rent and other passive income in later years. Whatever is left is released at a taxable sale.

Does my purchase qualify for the 100 percent allowance?

The allowance is 100 percent for qualified property acquired after the January 2025 date named at the top of this page. Whether your purchase qualifies depends on the acquisition date and the contract. Your CPA confirms it.

What comes back when I sell?

Depreciation on the reclassified items comes back as ordinary income, up to the amount taken. Depreciation on the building comes back as gain taxed at up to 25 percent. A 1031 exchange defers both.

Is a study useful on an unfurnished long-term rental?

Less often. Most of the value a study finds in a condo is the furniture, appliances and finishes that come with a furnished unit. An unfurnished unit has less to move.

Sources: Publication 946, Publication 544, Topic 409, Cost Segregation Audit Techniques Guide, 26 U.S.C. 1245. Read September 4, 2026. Educational only, not tax advice. Whether a study makes sense is a question for your CPA.

Have us help find your next investment.

We find furnished units that fit your plan and settle what comes with them before you offer.