Cost Segregation in New York

The nation's third-largest economy, global financial capital, and some of the highest property values in America — New York's massive tax savings potential through cost segregation makes it essential for investors navigating one of the country's most complex tax landscapes.

Population
19.6M
Median Home
$420K
Property Tax
1.62%
4th highest in U.S.
State Income Tax
10.9%
Progressive
Bonus Depreciation
Partial
State Conformity
Avg. Insurance
$2,100
9% below average (statewide) / 20-40% above in NYC
Tax Strategy

Cost Segregation & Tax Rules in New York

Understanding how federal and New York state tax rules interact is critical to maximizing your cost segregation benefits.

Cost Seg Overview
State vs. Federal Rules
Tax Landscape
Median Home Price
$420K
Building Value
70%
of purchase price
Cost Seg Range
25-40%
of building reclassified
Median Home Age
58 yrs
Built ~1966
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 New York, typical reclassification rates are 25-40% of building value.

Common Property Types
Multi-Family (2-4 units)Brownstones & TownhomesSingle-Family ColonialCondominiums
Higher property values in NYC and suburbs command higher study fees but deliver exceptional ROI. Upstate properties in the $200-400K range have lower study costs with strong returns.
Overline Study Cost & ROI
Overline Study Cost
$499 - $2,000
Avg. ROI
10-40x

The math: A $420K property with 70% building value and 30% reclassification yields ~$33K 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 1966, New York's housing stock has identifiable components (HVAC, electrical, plumbing, landscaping) that are strong candidates for accelerated depreciation.

Partial — Addback Required
New York Bonus Depreciation Conformity

New York requires a full addback of federal bonus depreciation. The state allows depreciation under pre-2002 IRC rules, meaning NY taxpayers must use standard MACRS schedules (without bonus) at the state level.

What This Means for Your Investment: Federal cost segregation benefits apply in full — 100% bonus depreciation on reclassified components. State-level deductions follow standard MACRS schedules, creating a timing difference but not a permanent loss. The high state tax rate (up to 10.9%) means deferred state savings are still very significant over time.

Federal vs. NY Depreciation Timeline
PeriodFederal TreatmentNY State Treatment
Year 1100% bonus depreciationStandard MACRS (no bonus) — ~15% of reclassified amount
Years 2+Standard MACRS schedulesContinued standard MACRS depreciation
Section 179 Expensing
State ConformityLimited

NY limits Section 179 to $250,000. Plan accordingly when combining with cost segregation strategies.

Key Takeaway

A $500K property with a $350K depreciable basis and 30% cost seg reclassification yields ~$38,850 in federal tax savings in Year 1. NY state savings of ~$1,700 begin in Year 1 and accumulate over the standard depreciation schedule.

Bottom Line

Federal savings are immediate and substantial. NY state savings follow standard MACRS schedules without bonus — deferred but not lost. Given NY's high state tax rates, the cumulative state benefit over the depreciation period is significant.

Eff. Property Tax
1.62%
4th highest in U.S.
Transfer Tax
$2 per $500 (0.4%) + mansion tax 1%+ above $1M
State Income Tax
10.9%
Progressive
Property Tax Details

Rates vary enormously — NYC effective rate is ~0.88% due to assessment caps, while suburban counties like Westchester and Nassau exceed 2.0%. Upstate averages ~1.5%.

Assessment Methodology
MethodMarket value (NYC uses assessed value ratios by property class)
Reassessment CycleAnnually
Assessment BodyNYC Dept. of Finance / County assessors outside NYC
Appeal WindowMarch 1 for Class 1; March 15 for Class 2-4 (NYC)
Appeal Success Likelihood
Very High
LowModerateGoodVery High

NYC's complex 4-class system frequently over-assesses income-producing properties. Tax Commission appeals are free to file and have high success rates. Outside NYC, county-level SCAR (Small Claims Assessment Review) provides a simple, no-cost appeal process. High effective rates make successful appeals extremely valuable.

Work with Overline — Our team helps New York 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 New York

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

Typical New York Property Details
$
50%95%
5%35%
2%25%
Total Reclassified30% of building
10%37%
Estimated Year 1 Tax Savings
Building Value$350,000
$500,000 x 70%
Normal Annual Depreciation$12,727
$350,000 ÷ 27.5 yr (residential)
5-Year Reclassified$63,000
15-Year Reclassified$42,000
Total Accelerated$105,000
30% of $350,000 building value
Federal Tax Savings (Year 1)$38,850
$105,000 x 37% bracket
Total Year 1 Tax Savings$38,850
8.3x normal annual deduction captured in Year 1

NY State Tax: Federal cost segregation benefits apply in full — 100% bonus depreciation on reclassified components. State-level deductions follow standard MACRS schedules, creating a timing difference but not a permanent loss. The high state tax rate (up to 10.9%) means deferred state savings are still very significant over time.

Depreciable Basis

Land vs. Building Value in New York

The land-to-building ratio directly impacts your cost segregation benefit — only the building portion is depreciable. Here is how New York breaks down by region.

Statewide Average
Building (Depreciable)70%
Land (Non-Depreciable)30%
70%
Depreciable Basis
Breakdown by Region
Manhattan
45% Building

Extreme land premiums. Cost seg still valuable on high-value buildings but reduced depreciable basis.

Brooklyn/Queens
60% Building

Gentrification has pushed land values up. Multi-family brownstones still offer good cost seg potential.

Long Island/Westchester
65% Building

Suburban premium on land. Newer construction has more reclassifiable components.

Hudson Valley
75% Building

More affordable with solid building ratios. Growing remote-work migration market.

Buffalo/Rochester
85% Building

Best cost seg ratios in NY. Very affordable entry points with high depreciable basis.

Upstate Rural
88% Building

Lowest land costs. Excellent cost seg economics but smaller rental market.

Investor Takeaway

NYC metro offers massive absolute tax savings due to high property values despite lower building ratios (45-65%). Upstate markets (Buffalo, Rochester) deliver the best cost seg efficiency with 85%+ building ratios at a fraction of the price.

Insurance & Risk

Insurance Landscape in New York

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

Avg. Annual Premium
$2,100
9% below average (statewide) / 20-40% above in NYC
National Average
$2,300
for comparison
Premium Trend
Rising 5-8% annually, faster in coastal areas
Primary Risk Drivers
1
Coastal Storms & Nor'easters
Long Island and NYC coastal areas face hurricane and nor'easter risk. Superstorm Sandy (2012) caused $32B+ in damage.
2
Aging Infrastructure
NYC and older upstate buildings face claims from aging plumbing, electrical, and structural systems.
3
Severe Winter Weather
Upstate NY faces heavy snow loads, ice dams, and freeze-related pipe bursts driving winter claims.
Coverage Recommendations
Flood insurance mandatory in FEMA flood zones (much of coastal NYC, Long Island)
Wind/hail coverage with separate deductible for coastal properties
Replacement cost coverage — critical for older brownstones and pre-war buildings
Umbrella liability ($1M+) especially for multi-family properties
Cost Seg + Insurance Connection

A cost segregation study documents building components and their values in detail — this supports accurate insurance replacement cost estimates. NYC property owners with cost seg studies are better positioned to substantiate claims and negotiate premiums on high-value properties.

Market Fundamentals

Economy & Housing Demand in New York

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

State GDP
$2.0T
Growing 1.8%/year
Unemployment
4.1%
Below national average
Median Income
$75,000
+15.8% over 5 years
Pop. Growth (1Y)
-0.2%
-300,000/year (net domestic outflow, offset by international immigration) net migration
Major Industries
Finance & Insurance22%
Wall Street is the global financial capital. Goldman Sachs, JPMorgan Chase, Citigroup, Morgan Stanley all HQ'd in NYC.
Technology14%
NYC is America's #2 tech hub. Google, Meta, Amazon, and thousands of startups. 'Silicon Alley' employs 350K+ tech workers.
Healthcare13%
NYU Langone, Mount Sinai, NewYork-Presbyterian, Northwell Health. The state's largest private employers.
Professional Services11%
Big Four accounting, top law firms, and consulting firms anchor a massive professional services economy.
Media & Entertainment8%
TV, film, publishing, and advertising industries are centered in NYC. $100B+ annual economic impact.
Key Economic Engines
Wall Street: Global financial capital — $2T+ in assets managed from NYC
Tech ecosystem: 350K+ tech workers, Google and Amazon expanding NYC offices
Healthcare: Northwell Health (85K employees), NYU Langone, Mount Sinai systems
Higher Education: 1.2M+ students across Columbia, NYU, Cornell, SUNY/CUNY systems
Housing Demand Signals
5-Year Pop. Growth
-1.1%
Housing Permits YoY
+2.1%
Median Days on Market
55 days
Months of Inventory
3.2
Migration: Domestic outflow to lower-tax states (FL, TX, NC). Strong international immigration and job creation in tech/finance offset losses. NYC remains a global talent magnet.
Construction: Brownstone/rowhouse (NYC), Multi-family walk-up (NYC), Wood frame colonial (suburbs), Brick ranch (upstate)
Landlord & STR Rules
Landlord Friendliness
Tenant-Friendly
Eviction Timeline
90-180+ days
Rent Control
Rent stabilization in NYC (1M+ units). No statewide rent control but Good Cause Eviction limits rent increases.
STR Regulation
Restrictive

NYC Local Law 18 (effective 2023) requires STR hosts to register with the city, be present during stays, and limits guests to 2. Effectively bans most whole-unit STRs in NYC. Upstate and suburban areas are far more permissive.

Local Markets

Top Cities for Investors in New York

Explore city-level cost segregation data, sample deals, and investment fundamentals for each major market in New York.

New York City, NY
#1 U.S. City Economy
Median Home
$750K
Rent (3BR)
$3,800
Property Tax
0.88%
Avg. Insurance
$2,800/yr
Est. Year 1 Tax Savings$57K+
View New York City Details
Buffalo, NY
Cash Flow Play
Median Home
$220K
Rent (3BR)
$1,450
Property Tax
2.15%
Avg. Insurance
$1,600/yr
Est. Year 1 Tax Savings$20K+
View Buffalo Details
Local Partners

Investor-Friendly Partners in New York

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

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 New York?

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Frequently Asked Questions

Cost Segregation FAQ — New York

Does New York conform to federal bonus depreciation?

−

New York requires a full addback of federal bonus depreciation. The state allows depreciation under pre-2002 IRC rules, meaning NY taxpayers must use standard MACRS schedules (without bonus) at the state level.

What is the property tax rate in New York?

+

The effective property tax rate in New York is 1.62%, ranked 4th highest in U.S. in the U.S. Rates vary enormously — NYC effective rate is ~0.88% due to assessment caps, while suburban counties like Westchester and Nassau exceed 2.0%. Upstate averages ~1.5%.

How much can I save with cost segregation in New York?

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A $500K property with a $350K depreciable basis and 30% cost seg reclassification yields ~$38,850 in federal tax savings in Year 1. NY state savings of ~$1,700 begin in Year 1 and accumulate over the standard depreciation schedule.

What are the typical cost segregation reclassification rates in New York?

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In New York, typical cost segregation studies reclassify 25-40% of building value into accelerated depreciation categories (5-year, 7-year, and 15-year property). Overline studies cost $499-$2,000 with 10-40x ROI.

What is the average insurance cost for rental properties in New York?

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The average annual homeowner insurance premium in New York is $2,100, which is 9% below average (statewide) / 20-40% above in NYC the national average of $2,300. Key risk drivers include Coastal Storms & Nor'easters and Aging Infrastructure.

What is the state income tax rate in New York?

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New York has a state income tax rate of 10.9% (Progressive). NYC residents pay an additional 3.078%-3.876% city income tax on top of state rates. Combined NYC top rate reaches 14.776%, making cost segregation deductions exceptionally valuable.

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