Your rental properties can shelter more of your income.
Cost segregation, 100% bonus depreciation, and the right activity classification can offset rental income and, in the right facts, your W-2 income too. Summer Associates models the federal and Connecticut result before you buy, renovate, or sell.
Or call (203) 327-4311 to talk with our Stamford office.
Enrolled agents
Our practitioners are enrolled to practice before the Internal Revenue Service.
Federal and Connecticut
We model federal and Connecticut tax together, so you see the state effect of a federal move before you make it.
Local to Fairfield County
Based in Stamford and serving clients for over 35 years.
Planning, not just filing
We focus on the decisions you can still change: elections, timing, and year-end moves.
Where investors find the deductions
Depreciation generates the deductions. Activity classification decides whether those losses reach your other income.
Cost segregation studies
Typically reclassify 20–35% of a building's basis into 5-, 7-, and 15-year property and expense it with 100% bonus.
How it works →Activity rulesThe short-term rental loophole
If the average guest stay is 7 days or less and you materially participate, losses can offset W-2 income.
How it works →StatusReal estate professional status (REPS)
Qualify with more than 750 hours and over half your working time in real property trades, then make the aggregation election.
How it works →Deferral1031 like-kind exchanges
Roll gain and building depreciation recapture into the next property instead of paying tax on the sale.
How it works →PlanningHarvesting suspended passive losses
Losses that couldn't be used each year are fully released when you dispose of the activity in a taxable sale.
How it works →StructureLLC structure and liability layering
Hold properties in LLCs taxed as disregarded entities or partnerships, and avoid S corps for appreciating real estate.
How it works →In-depth guides
Plain-English explainers covering the rules, the numbers, and the common mistakes.
Cost segregation and 100% bonus depreciation: the 2026 investor's guide
How cost segregation reclassifies building basis into 5-, 7-, and 15-year property, why 100% bonus depreciation matters, and how to catch up on property you already own.
Read the guide · 9 min →Connecticut taxes for real estate investors: a Fairfield County guide
Connecticut's conveyance tax, Fairfield County mill rates, the state's bonus depreciation add-back, 15% STR occupancy tax, and 1031 exchanges.
Short-term rentalsThe short-term rental loophole: using STR losses against W-2 income
Why a property with an average stay of seven days or less isn't a rental activity, how material participation makes the losses nonpassive, and how to document it.
Passive activityReal estate professional status: the 750-hour test and the aggregation election
What it takes to qualify as a real estate professional, why the aggregation election matters, and how REPS compares with the $25,000 allowance.
How working with Summer Associates starts
The first consultation is free, with no obligation. From the first call to a plan, the process has three steps.
Start with a conversation
Call (203) 327-4311 or send us a note. Tell us what you are working on and what you want to solve.
We review the details
We look at your property list, recent closing statements, and last return to see which strategies fit and what they could be worth.
You get a plan
We model the options on your numbers, federal and Connecticut, and set out the steps and the deadlines that apply.
Summer Associates Tax Services, 48 Union St, #1C, Stamford, CT 06906. Convenient to clients throughout Fairfield County, including Greenwich, Darien, New Canaan, Norwalk, Westport, and Fairfield.
Book a free consultationThe 2026 numbers that matter
The federal figures investors use most when planning acquisitions and year-end moves, plus the Connecticut rules that differ.
| Item | 2026 figure | Notes & source |
|---|---|---|
| Bonus depreciation | 100% | Permanent under current law for property acquired after Jan. 19, 2025, judged by the binding-contract date (IRS Notice 2026-11) |
| Residential rental recovery period | 27.5 years | Nonresidential: 39 years, which often applies to short-term rentals with stays under 30 days (IRS Pub. 946) |
| Section 179 limit (2026) | $2,560,000 | Phase-out begins at $4,090,000, and the 2027 figures are $2,640,000 and $4,230,000. Use is limited for most rentals, so bonus is usually the main tool (Rev. Proc. 2025-32; Rev. Proc. 2026-35) |
| Real estate professional hours | More than 750 | Plus more than half of all personal services (IRS Pub. 925) |
| $25,000 rental loss allowance | Phases out $100k–$150k MAGI | Requires active participation and at least 10% ownership (IRS Pub. 925) |
| 1031 identification / closing | 45 / 180 days | Measured from the sale of the relinquished property (IRS Form 8824 instructions) |
| Connecticut conveyance tax (seller pays) | 0.75%–2.25% + 0.25%–0.50% local | State rate is 0.75% flat on multi-unit housing, tiered on single-family homes and condos, and 1.25% on commercial. Due at recording, including in a 1031 exchange (CGS §§12-494, 12-498) |
| Connecticut bonus depreciation | Added back, then 25% a year | 100% of federal bonus is added back on the CT return and subtracted 25% a year over the next four years. For §179, 80% is added back the same way (CGS §12-701) |
Common questions
Can rental losses offset my W-2 income?
Usually not, because rental losses are passive. The main exceptions are qualifying as a real estate professional, operating a short-term rental where the average stay is seven days or less and you materially participate, or the $25,000 allowance for active participants who own at least 10% and have MAGI under $100,000. That allowance is phased out by $150,000.
Is a cost segregation study worth it on a single-family rental?
That depends on the building's basis. Studies on properties under roughly $300,000 to $400,000 of building basis often cost more than they save, unless the deduction is nonpassive and offsets high-bracket income. A preliminary estimate from an advisor can answer the question before you pay for an engineer.
What happens to bonus depreciation when I sell?
The accelerated depreciation is recaptured. Personal property components are recaptured as ordinary income under §1245, bonus on 15-year land improvements is also ordinary income to the extent it exceeds straight-line depreciation, and building depreciation is taxed at up to 25%. A 1031 exchange defers the building recapture, but furniture and other personal property can't be exchanged, and §1245 recapture is deferred only if the replacement property has enough §1245 property of its own.
Do I need to file anything to claim missed depreciation?
For property placed in service in an earlier year, you generally file Form 3115 to change your accounting method and take the catch-up as a §481(a) adjustment in the current year.
Does Connecticut allow bonus depreciation from a cost segregation study?
Not in the first year. Connecticut adds back 100% of federal bonus depreciation on your state return and lets you subtract 25% of it in each of the next four years, so the state benefit is delayed rather than lost. Section 179 is treated similarly: 80% is added back and recovered over four years.
Who pays Connecticut's real estate conveyance tax, and is it due in a 1031 exchange?
The seller pays it when the deed is recorded: 0.75% to 2.25% to the state, depending on property type and price, plus 0.25% to 0.50% to the town. Connecticut's exemptions don't include like-kind exchanges, so it is due on the property you give up even though the income tax on the gain is deferred.
Find out what your portfolio could be deducting.
In a consultation, we look at your properties and recent closings, estimate what a cost segregation study could add, and tell you whether your losses can reach your other income.