Cost Segregation in Denver, CO

The Mile High City's booming tech economy, premium rents, and Colorado's full bonus depreciation conformity create a powerful combination — high-income tenants, strong appreciation, and Year 1 tax savings approaching $50K on a typical investment.

Population
2.9M
Median Home
$550K
Rent (3BR)
$2,500
Property Tax
0.51%
Annual Job Growth
35K+
Ranking
Top 10 Tech Hub
Overview

Value Props for Investors

TECH MAGNET
Top-10 Tech Hub with Major HQ Relocations

Palantir, Chipotle, and Arrow Electronics have moved HQs to Denver. Oracle, Amazon, and Google continue expanding. The tech corridor along I-25 employs 100K+ workers earning $90K-$200K — creating a deep pool of high-income tenants.

LIFESTYLE PREMIUM
300 Days of Sunshine + Mountain Access

Denver's unmatched outdoor lifestyle — skiing, hiking, craft beer, and 300+ sunny days — creates sustained demand from remote workers and young professionals nationwide driving 5-7% annual rent growth.

LOWEST PROPERTY TAX
0.51% Effective Rate — Among Nation's Lowest

Colorado's assessment ratio system creates one of the lowest effective property tax rates for any major metro. On a $550K property, you pay just ~$2,800/year in property tax — $5K-$8K less annually than Texas or Ohio.

Tax Strategy

Cost Segregation & Tax Rules in Denver, CO

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

Cost Seg Overview
State vs. Federal Rules
Tax Landscape
Typical Purchase
$550,000
Building Value
72%
28% land / 72% building
Cost Seg Range
25-38%
of building reclassified
Home Age
30 yrs
Built ~1994
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 Denver, typical reclassification rates are 25-38% of building value.

Purchase Price Breakdown
Building 72%$396,000
Land 28%$154,000
Building Value Reallocation (with Cost Seg)
5-Year Property18%
$71,280
15-Year Property12%
$47,520
27.5 / 39-Year (Remaining)70%
$277,200

5 & 15-year components ($118,800 = 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 $550,000 property with 72% building value and 30% reclassification yields ~$43,956 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 1994, Denver'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 Denver 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
0.51%
Denver 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

Denver County effective rate of ~0.51% is among the lowest for any major U.S. metro. Colorado's assessment ratio system keeps rates extremely low.

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 Denver 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 Denver, 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 Denver, CO Property Details
$
50%95%
5%35%
2%25%
Total Reclassified30% of building
10%37%
Estimated Year 1 Tax Savings
Building Value$396,000
$550,000 x 72%
Normal Annual Depreciation$14,400
$396,000 ÷ 27.5 yr (residential)
5-Year Reclassified$71,280
15-Year Reclassified$47,520
Total Accelerated$118,800
30% of $396,000 building value
Federal Tax Savings (Year 1)$43,956
$118,800 x 37% bracket
CO State Tax Savings (Year 1)$5,227
Total Year 1 Tax Savings$49,183
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 Denver

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

Avg. Annual Premium
$2,800
Denver average
State Average
$2,800
22% above average
National Average
$2,300
for comparison
Key Risk Drivers
1
Severe hail storms (Front Range)
2
Wildfire risk (western suburbs)
3
Spring flooding from snowmelt
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 Denver

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

Long-Term Rental
Monthly Rent (3BR)$2,500
Annual Gross$30,000
Vacancy Rate4%
Net Annual$28,800
Tenant StabilityTech professionals and healthcare workers sign 12-18 month leases with strong payment history
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$195
Occupancy Rate70%
Annual Gross Revenue$49,823
Net Annual (after expenses)$37,367
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

While Denver proper restricts STRs to primary residences, the LTR math is compelling — $2,500/month rents with 0.51% property tax create strong cash flow. For STR strategies, target nearby suburbs or mountain properties.

Market Fundamentals

Economy & Housing Demand in Denver

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

Median Income
$85,000
Rent-to-Income
28%
Healthy ratio
Vacancy Rate
4.2%
Pop. Growth
+1.2% annually
Major Employers
1
UCHealth (26K+)
2
Lockheed Martin (12K+)
3
DaVita HQ (5K+)
4
Oracle (5K+)
5
Charles Schwab (5K+)
6
Arrow Electronics HQ (3K+)
Top Industries
Technology
Healthcare
Aerospace & Defense
Energy
Financial Services
Landlord & STR Rules
Landlord Friendliness
Moderate
Eviction Timeline
45-60 days
STR Regulation
Restricted — primary residence only

Denver requires a Short-Term Rental license and limits STRs to the owner's primary residence. Investors pursuing STR should target suburbs (Aurora, Lakewood, Westminster) or mountain markets.

Why Invest Here

Denver combines a top-10 tech economy with premium rents and the nation's lowest effective property tax rate. At $550K median prices, Denver is more affordable than comparable tech hubs (SF, Seattle) while delivering premium $2,500/month rents.

Where to Invest

Top Neighborhoods in Denver

#1
Aurora (East)
Diverse, affordable suburb with Anschutz Medical Campus
Price
$430K
Rent
$2,200
Yield
6.1%
Aurora offers the best value in metro Denver — 20% below Denver proper with comparable rents. Anschutz Medical Campus (20K+ workers) provides stable demand. STRs are permitted here.
$430K$2,2006.1%
Aurora offers the best value in metro Denver — 20% below Denver proper with comparable rents. Anschutz Medical Campus (20K+ workers) provides stable demand. STRs are permitted here.
Aurora offers the best value in metro Denver — 20% below Denver proper with comparable rents. Anschutz Medical Campus (20K+ workers) provides stable demand. STRs are permitted here.
#2
Lakewood / Wheat Ridge
Established west-side suburbs with mountain views and light rail
Price
$500K
Rent
$2,350
Yield
5.6%
West side suburbs benefit from mountain proximity and RTD light rail. More permissive STR rules than Denver proper. 1960s-1980s housing yields strong cost seg.
$500K$2,3505.6%
West side suburbs benefit from mountain proximity and RTD light rail. More permissive STR rules than Denver proper. 1960s-1980s housing yields strong cost seg.
West side suburbs benefit from mountain proximity and RTD light rail. More permissive STR rules than Denver proper. 1960s-1980s housing yields strong cost seg.
#3
Thornton / Northglenn
Affordable north suburbs with I-25 access
Price
$460K
Rent
$2,200
Yield
5.7%
Among the lowest entry prices in the metro with strong rental demand from healthcare and logistics workers.
$460K$2,2005.7%
Among the lowest entry prices in the metro with strong rental demand from healthcare and logistics workers.
Among the lowest entry prices in the metro with strong rental demand from healthcare and logistics workers.
#4
Highlands / LoHi
Trendy urban with craft breweries and walkability
Price
$650K
Rent
$2,800
Yield
5.2%
Denver's most desirable neighborhood commands premium rents. Higher entry offset by 8-10% annual appreciation and near-zero vacancy. Pre-1950s housing creates above-average cost seg.
$650K$2,8005.2%
Denver's most desirable neighborhood commands premium rents. Higher entry offset by 8-10% annual appreciation and near-zero vacancy. Pre-1950s housing creates above-average cost seg.
Denver's most desirable neighborhood commands premium rents. Higher entry offset by 8-10% annual appreciation and near-zero vacancy. Pre-1950s housing creates above-average cost seg.
#5
Park Hill / Central Park
Family-friendly with top schools and new construction
Price
$580K
Rent
$2,600
Yield
5.4%
One of Denver's largest master-planned communities. New construction maximizes cost seg components. Family rental demand keeps vacancy below 3%.
$580K$2,6005.4%
One of Denver's largest master-planned communities. New construction maximizes cost seg components. Family rental demand keeps vacancy below 3%.
One of Denver's largest master-planned communities. New construction maximizes cost seg components. Family rental demand keeps vacancy below 3%.
Local Partners

Investor-Friendly Partners in Denver, CO

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

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Frequently Asked Questions

Cost Segregation FAQ — Denver, CO

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

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On a typical $550K property in Denver, cost segregation can yield approximately $49,183 in Year 1 combined federal and state tax savings at the 37% bracket, with a study ROI of 757%. Overline studies cost $499-$2,000.

What is the property tax rate in Denver?

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The effective property tax rate in Denver is approximately 0.51%. Denver County effective rate of ~0.51% is among the lowest for any major U.S. metro. Colorado's assessment ratio system keeps rates extremely low.

Is Denver a good market for real estate investing?

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Denver combines a top-10 tech economy with premium rents and the nation's lowest effective property tax rate. At $550K median prices, Denver is more affordable than comparable tech hubs (SF, Seattle) while delivering premium $2,500/month rents.

What is the average insurance cost for rental properties in Denver?

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The average annual homeowner insurance premium in Denver is approximately $2,800. Denver's Front Range location makes it one of the most hail-prone metros in the country. Expect wind/hail deductible of 1-2% of coverage. Factor $2,800/year into cash flow projections.

What are the STR and landlord rules in Denver?

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Denver is rated "Moderate" for landlords. STR regulation: Restricted — primary residence only. Eviction timeline: 45-60 days. Denver requires a Short-Term Rental license and limits STRs to the owner's primary residence. Investors pursuing STR should target suburbs (Aurora, Lakewood, Westminster) or mountain markets.

Who are the major employers in Denver?

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Major employers in Denver include UCHealth (26K+), Lockheed Martin (12K+), DaVita HQ (5K+), Oracle (5K+), Charles Schwab (5K+). Top industries: Technology, Healthcare, Aerospace & Defense, Energy, Financial Services.

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