Cost Segregation in Colorado Springs, CO

America's new space capital — U.S. Space Command, five military installations, and a booming tech corridor deliver recession-proof rental demand at 25% below Denver prices, all with Colorado's full bonus depreciation and ultra-low property taxes.

Population
750K
Median Home
$420K
Rent (3BR)
$2,000
Property Tax
0.48%
Annual Job Growth
15K+
Ranking
Space Capital
Overview

Value Props for Investors

SPACE CAPITAL
U.S. Space Command + 5 Military Installations

U.S. Space Command's permanent HQ, Peterson and Schriever SFBs, Fort Carson, and the Air Force Academy generate $15B+ in annual economic impact. Military BAH guarantees on-time rent of $2,000-$2,400/month.

DENVER DISCOUNT
$420K Entry — 25% Below Denver Prices

Colorado Springs delivers all of Colorado's tax advantages (full conformity, 0.48% property tax, 4.40% flat rate) at 25% lower entry prices than Denver with significantly stronger cash-on-cash returns.

STR FRIENDLY
No Primary-Residence STR Restriction

Unlike Denver, Colorado Springs allows investment property STRs with a business license. Pikes Peak tourism, USAFA events, and military TDY travelers create year-round STR demand.

Tax Strategy

Cost Segregation & Tax Rules in Colorado Springs, CO

Understanding how federal and Colorado state tax rules interact is critical to maximizing your cost segregation benefits in Colorado Springs.

Cost Seg Overview
State vs. Federal Rules
Tax Landscape
Typical Purchase
$420,000
Building Value
78%
22% land / 78% building
Cost Seg Range
25-38%
of building reclassified
Home Age
26 yrs
Built ~1998
What Gets Reclassified

A cost segregation study identifies building components that can be depreciated over 5, 7, or 15 years instead of the standard 27.5 or 39 years. In Colorado Springs, typical reclassification rates are 25-38% of building value.

Purchase Price Breakdown
Building 78%$327,600
Land 22%$92,400
Building Value Reallocation (with Cost Seg)
5-Year Property18%
$58,968
15-Year Property12%
$39,312
27.5 / 39-Year (Remaining)70%
$229,320

5 & 15-year components ($98,280 = 30% of building) are eligible for bonus depreciation in Year 1.

Overline Study Cost & ROI
Overline Study Cost
$499 - $2,000
Avg. ROI
10-40x

The math: A $420,000 property with 78% building value and 30% reclassification yields ~$36,364 in Year 1 federal tax savings at the 37% bracket — significantly more ROI than traditional studies costing $5,000-$10,000+.

Housing Stock Advantage

With a median build year of 1998, Colorado Springs's housing stock has identifiable components (HVAC, electrical, plumbing, landscaping) that are strong candidates for accelerated depreciation.

Full Conformity
Colorado Bonus Depreciation Conformity

Colorado adopts federal bonus depreciation in full under IRC Section 168(k). Cost segregation reclassifications qualify for 100% first-year expensing on both federal and CO state returns — a significant advantage given Colorado's 4.40% flat tax rate and TABOR-capped property tax environment.

What This Means for Colorado Springs Investors: Full conformity combined with Colorado's 4.40% flat tax means significant state-level savings on top of federal benefits. The very low property tax rate (0.49%) further amplifies net returns.

Federal vs. CO Depreciation Timeline
PeriodFederal TreatmentCO State Treatment
Year 1100% bonus depreciation100% bonus depreciation (full conformity)
Years 2+Standard MACRS schedulesSame as federal
Section 179 Expensing
State ConformityConforms

Colorado conforms to federal Section 179 limits, allowing immediate expensing of qualifying property. This is particularly relevant for mountain/ski rental properties with significant personal property components.

Key Takeaway

A $510K property with a $367K depreciable basis and 30% cost seg reclassification yields ~$40.8K in federal tax savings PLUS ~$4.8K in CO state tax savings in Year 1 — a total of ~$45.6K with some of the lowest property taxes in America boosting your net cash flow.

Bottom Line

Colorado is a full-conformity state. Every dollar of federal bonus depreciation flows through to your CO state return with no addback or modification. The 4.40% state rate provides meaningful additional savings that, combined with the nation's lowest effective property tax, maximize your after-tax cash flow.

Local Property Tax
0.48%
Colorado Springs effective rate
Transfer Tax
$0.01 per $100 of sale price (state) + local fees may apply
State Income Tax
4.40%
Flat
Property Tax Details

El Paso County effective rate of ~0.48% is among the lowest for any city over 400K population in America.

Assessment Methodology
MethodActual (market) value with residential assessment rate of 6.7%
Reassessment CycleEvery 2 years (odd years)
Assessment BodyCounty Assessor
Appeal WindowWithin 30 days of Notice of Valuation (typically May 1 – June 1)
Appeal Success Likelihood
Good
LowModerateGoodVery High

Colorado's biennial reassessment and the 2023 reduction of the residential assessment rate from 6.95% to 6.7% benefit investors. Rapid market swings between reassessment years create strong appeal opportunities. The state's TABOR amendment limits revenue growth, adding taxpayer protections.

Work with Overline — Our team helps Colorado Springs investors identify over-assessed properties and file tax appeals. A successful appeal can save thousands annually and compounds your cost seg savings.

Illustrative Example

Cost Seg Example for Colorado Springs, CO

This example assumes a purchase eligible for 100% bonus depreciation. All factors below are based on averages from our historical cost segregation studies for CO properties. To see your exact savings, run a property-specific cost seg analysis below.

Typical Colorado Springs, CO Property Details
$
50%95%
5%35%
2%25%
Total Reclassified30% of building
10%37%
Estimated Year 1 Tax Savings
Building Value$327,600
$420,000 x 78%
Normal Annual Depreciation$11,913
$327,600 ÷ 27.5 yr (residential)
5-Year Reclassified$58,968
15-Year Reclassified$39,312
Total Accelerated$98,280
30% of $327,600 building value
Federal Tax Savings (Year 1)$36,364
$98,280 x 37% bracket
CO State Tax Savings (Year 1)$4,324
Total Year 1 Tax Savings$40,688
8.3x normal annual deduction captured in Year 1

CO State Tax: CO has full bonus depreciation conformity — both federal and state savings hit your pocket in Year 1.

Insurance & Risk

Insurance Landscape in Colorado Springs

Insurance costs directly impact your cash flow. Understanding Colorado Springs's risk profile helps you budget accurately and avoid coverage gaps.

Avg. Annual Premium
$2,400
Colorado Springs average
State Average
$2,800
22% above average
National Average
$2,300
for comparison
Key Risk Drivers
1
Severe hail storms
2
Wildfire risk (Waldo Canyon, Black Forest)
3
High wind events
Coverage Recommendations
Wind/hail deductible awareness — typically 1-2% of dwelling coverage
Wildfire-specific coverage for mountain and foothill properties
Flood insurance for properties near creeks or in known flood plains
Umbrella liability policy ($1M+) for rental properties
Cost Seg + Insurance Connection

Colorado's high insurance costs make accurate replacement cost documentation critical. A cost seg study provides detailed component-level valuations that help ensure you're not underinsured — particularly important for roofing, HVAC, and structural components that face Colorado's extreme weather.

Revenue Comparison

STR vs. Long-Term Rental in Colorado Springs

Compare short-term (Airbnb) and long-term rental income for a typical Colorado Springs investment property.

Long-Term Rental
Monthly Rent (3BR)$2,000
Annual Gross$24,000
Vacancy Rate4%
Net Annual$23,040
Tenant StabilityMilitary BAH tenants provide the most reliable rent payment in real estate — government-backed and consistent
Depreciation Schedule27.5 years
Residential rental property
Tax TreatmentPassive Only
Losses can only offset passive income unless you qualify as a Real Estate Professional (750+ hrs/yr)
Short-Term Rental
Avg. Nightly Rate$160
Occupancy Rate67%
Annual Gross Revenue$39,128
Net Annual (after expenses)$29,346
ManagementSelf or 20-25% PM fee
Depreciation Schedule39 years
Classified as commercial / transient use property
Tax TreatmentActive Income Eligible
Losses can offset W-2 / active income if you document 100+ hrs of material participation and meet IRS criteria
Cost Seg + STR Loophole

Colorado Springs' STR-friendly rules let investors combine cost seg + material participation with Pikes Peak tourism and military TDY demand. A $420K property can generate $40.7K in Year 1 tax savings while earning 60% more gross revenue as an STR.

Market Fundamentals

Economy & Housing Demand in Colorado Springs

Strong economic engines create stable rental demand. Here is what drives Colorado Springs's economy and housing market.

Median Income
$75,000
Rent-to-Income
26%
Healthy ratio
Vacancy Rate
4.0%
Pop. Growth
+1.5% annually
Major Employers
1
U.S. Space Command (HQ)
2
Fort Carson (25K+)
3
Lockheed Martin (7K+)
4
Peterson/Schriever SFB (8K+)
5
Air Force Academy (5K+)
6
UCHealth (8K+)
Top Industries
Military & Defense
Aerospace & Space
Cybersecurity
Healthcare
Technology
Landlord & STR Rules
Landlord Friendliness
Moderate
Eviction Timeline
45-60 days
STR Regulation
Permitted with licensing

Colorado Springs allows STRs with a business license and lodging tax collection. Unlike Denver, there is no primary-residence-only restriction, making the Springs more STR-friendly.

Why Invest Here

Colorado Springs has five military installations generating $15B+ in annual economic impact. U.S. Space Command's permanent HQ cemented the city as America's space capital. Military BAH ($2,000-$2,400/month) guarantees on-time rent. At $420K — 25% below Denver — the same Colorado tax advantages with stronger cash-flow economics.

Where to Invest

Top Neighborhoods in Colorado Springs

#1
Briargate / Northgate
Master-planned near USAFA and tech employers
Price
$470K
Rent
$2,200
Yield
5.6%
Premier family submarket near Air Force Academy, Lockheed Martin, and tech corridor. Military officers and defense contractors are the primary tenant base.
$470K$2,2005.6%
Premier family submarket near Air Force Academy, Lockheed Martin, and tech corridor. Military officers and defense contractors are the primary tenant base.
Premier family submarket near Air Force Academy, Lockheed Martin, and tech corridor. Military officers and defense contractors are the primary tenant base.
#2
Fountain / Security-Widefield
Affordable military gateway south of Fort Carson
Price
$350K
Rent
$1,800
Yield
6.2%
Most affordable entry in the metro, directly adjacent to Fort Carson. Military families receiving BAH are the primary tenant base. Sub-$350K prices allow rapid portfolio scaling.
$350K$1,8006.2%
Most affordable entry in the metro, directly adjacent to Fort Carson. Military families receiving BAH are the primary tenant base. Sub-$350K prices allow rapid portfolio scaling.
Most affordable entry in the metro, directly adjacent to Fort Carson. Military families receiving BAH are the primary tenant base. Sub-$350K prices allow rapid portfolio scaling.
#3
Powers Corridor
East-side growth corridor with new retail and healthcare
Price
$400K
Rent
$1,950
Yield
5.9%
Fastest-developing area with new construction, retail, and UCHealth expansion. Balanced cash flow and appreciation play.
$400K$1,9505.9%
Fastest-developing area with new construction, retail, and UCHealth expansion. Balanced cash flow and appreciation play.
Fastest-developing area with new construction, retail, and UCHealth expansion. Balanced cash flow and appreciation play.
#4
Old Colorado City / Westside
Arts district near Garden of the Gods with tourism draw
Price
$380K
Rent
$1,850
Yield
5.8%
Garden of the Gods proximity creates strong STR demand from tourists. 1950s-1970s housing yields above-average cost seg. Dual LTR/STR flexibility.
$380K$1,8505.8%
Garden of the Gods proximity creates strong STR demand from tourists. 1950s-1970s housing yields above-average cost seg. Dual LTR/STR flexibility.
Garden of the Gods proximity creates strong STR demand from tourists. 1950s-1970s housing yields above-average cost seg. Dual LTR/STR flexibility.
Local Partners

Investor-Friendly Partners in Colorado Springs, CO

We are building a curated directory of top investor-friendly brokers, property management companies, and service providers in Colorado Springs, CO.

Investor-Friendly Brokers

Top real estate agents who specialize in investment properties and understand cost segregation, 1031 exchanges, and cash-flow analysis.

Coming Soon
Property Management

Vetted property managers who handle tenant screening, maintenance, and rent collection for both long-term and short-term rentals.

Coming Soon
Insurance Agents

Independent insurance agents who specialize in rental property coverage and can leverage cost seg data for accurate replacement cost estimates.

Coming Soon

Are you a broker, property manager, or insurance agent serving investors in Colorado Springs, CO?

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Frequently Asked Questions

Cost Segregation FAQ — Colorado Springs, CO

How much can I save with cost segregation in Colorado Springs, CO?

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On a typical $420K property in Colorado Springs, cost segregation can yield approximately $40,688 in Year 1 combined federal and state tax savings at the 37% bracket, with a study ROI of 740%. Overline studies cost $499-$2,000.

What is the property tax rate in Colorado Springs?

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The effective property tax rate in Colorado Springs is approximately 0.48%. El Paso County effective rate of ~0.48% is among the lowest for any city over 400K population in America.

Is Colorado Springs a good market for real estate investing?

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Colorado Springs has five military installations generating $15B+ in annual economic impact. U.S. Space Command's permanent HQ cemented the city as America's space capital. Military BAH ($2,000-$2,400/month) guarantees on-time rent. At $420K — 25% below Denver — the same Colorado tax advantages with stronger cash-flow economics.

What is the average insurance cost for rental properties in Colorado Springs?

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The average annual homeowner insurance premium in Colorado Springs is approximately $2,400. Colorado Springs is hail-prone like the Front Range. The 2012 Waldo Canyon and 2013 Black Forest fires highlighted wildfire risk in western and northern areas.

What are the STR and landlord rules in Colorado Springs?

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Colorado Springs is rated "Moderate" for landlords. STR regulation: Permitted with licensing. Eviction timeline: 45-60 days. Colorado Springs allows STRs with a business license and lodging tax collection. Unlike Denver, there is no primary-residence-only restriction, making the Springs more STR-friendly.

Who are the major employers in Colorado Springs?

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Major employers in Colorado Springs include U.S. Space Command (HQ), Fort Carson (25K+), Lockheed Martin (7K+), Peterson/Schriever SFB (8K+), Air Force Academy (5K+). Top industries: Military & Defense, Aerospace & Space, Cybersecurity, Healthcare, Technology.

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