Cost Segregation in Austin, TX

Tesla's Gigafactory, Apple's $1B campus, and America's hottest tech corridor — Austin combines Silicon Hills innovation with zero state income tax and strong cost segregation fundamentals for investors who want growth and tax efficiency.

Population
2.3M
Median Home
$480K
Rent (3BR)
$2,300
Property Tax
1.68%
Annual Job Growth
50K+
Ranking
Silicon Hills
Overview

Value Props for Investors

TESLA & TECH
Tesla Gigafactory + Apple + Oracle = Silicon Hills

Tesla's Gigafactory employs 15K+ workers, Apple's campus has 6K+, and Oracle relocated its HQ to Austin. Samsung, Dell, Google, Meta, and Amazon all have major presences. This tech density creates the highest-income tenant pool in Texas.

UT AUSTIN
52K Students + State Capital Employment

The University of Texas flagship campus generates massive rental demand from students, faculty, and graduate researchers. State government employment adds a recession-proof demand layer. This dual anchor keeps vacancy low across the metro.

APPRECIATION PLAY
Strongest Growth Trajectory in Texas

Austin has the highest appreciation rate among Texas's big four metros. While the entry price ($480K) is higher, the combination of tech-driven appreciation, premium rents ($2,300/mo), and $40K in Year 1 cost seg savings creates a compelling total return story.

Tax Strategy

Cost Segregation & Tax Rules in Austin, TX

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

Cost Seg Overview
State vs. Federal Rules
Tax Landscape
Typical Purchase
$480,000
Building Value
75%
25% land / 75% building
Cost Seg Range
25-40%
of building reclassified
Home Age
20 yrs
Built ~2004
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 Austin, typical reclassification rates are 25-40% of building value.

Purchase Price Breakdown
Building 75%$360,000
Land 25%$120,000
Building Value Reallocation (with Cost Seg)
5-Year Property18%
$64,800
15-Year Property12%
$43,200
27.5 / 39-Year (Remaining)70%
$252,000

5 & 15-year components ($108,000 = 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 $480,000 property with 75% building value and 30% reclassification yields ~$39,960 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 2004, Austin's housing stock has identifiable components (HVAC, electrical, plumbing, landscaping) that are strong candidates for accelerated depreciation.

N/A — No State Income Tax
Texas Bonus Depreciation Conformity

Because Texas has no state income tax, there is no state-level depreciation deduction or conformity issue. Federal bonus depreciation under Section 168(k) applies in full and there is no state tax return to worry about.

What This Means for Austin Investors: Texas is one of the most favorable states for cost segregation. Your entire tax benefit comes from federal savings, with zero state-level complications. No addback, no phase-out, no conformity issues — just clean, immediate federal deductions.

Federal vs. TX Depreciation Timeline
PeriodFederal TreatmentTX State Treatment
Year 1100% bonus depreciationN/A — No state income tax
Years 2+Standard MACRS schedulesN/A — No state income tax
Section 179 Expensing
State ConformityLimited

No state income tax means Section 179 operates at the federal level only in Texas. With no state tax to offset, TX investors maximize their retained cash flow — the trade-off is higher property taxes that make cost seg studies even more critical for net returns.

Key Takeaway

A $350K property with a $262,500 depreciable basis and 30% cost seg reclassification yields ~$29,138 in federal tax savings in Year 1. Because Texas has no state income tax, your total Year 1 savings = $29,138 with zero state tax friction.

Bottom Line

Texas is the simplest state for cost segregation planning. No state income tax = no state depreciation deductions = no conformity issues. Your entire savings are federal, and they are immediate and unreduced.

Local Property Tax
1.68%
Austin effective rate
Transfer Tax
None — Texas has no transfer tax or documentary stamps
State Income Tax
0%
None
Property Tax Details

Travis County effective rate of ~1.68%. Williamson County (Round Rock, Cedar Park) is ~1.72%. Property taxes are the primary recurring cost but are offset by zero state income tax and strong appreciation.

Assessment Methodology
MethodMarket value (100% of appraised value)
Reassessment CycleAnnually
Assessment BodyCounty Appraisal District (CAD)
Appeal WindowMay 15 or 30 days after notice (whichever is later)
Appeal Success Likelihood
Very High
LowModerateGoodVery High

Texas has the most active property tax appeal market in the U.S. — over 50% of protests in major counties result in reductions. With no state income tax, property taxes are the primary revenue source, leading to aggressive valuations. ARB (Appraisal Review Board) hearings are free and informal. Binding arbitration and district court are available for larger properties.

Work with Overline — Our team helps Austin 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 Austin, TX

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

Typical Austin, TX Property Details
$
50%95%
5%35%
2%25%
Total Reclassified30% of building
10%37%
Estimated Year 1 Tax Savings
Building Value$360,000
$480,000 x 75%
Normal Annual Depreciation$13,091
$360,000 ÷ 27.5 yr (residential)
5-Year Reclassified$64,800
15-Year Reclassified$43,200
Total Accelerated$108,000
30% of $360,000 building value
Federal Tax Savings (Year 1)$39,960
$108,000 x 37% bracket
Total Year 1 Tax Savings$39,960
8.3x normal annual deduction captured in Year 1

TX State Tax: Texas is one of the most favorable states for cost segregation. Your entire tax benefit comes from federal savings, with zero state-level complications. No addback, no phase-out, no conformity issues — just clean, immediate federal deductions.

Insurance & Risk

Insurance Landscape in Austin

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

Avg. Annual Premium
$2,600
Austin average
State Average
$3,500
52% above average
National Average
$2,300
for comparison
Key Risk Drivers
1
Flash flooding from Hill Country storms
2
Severe hail events
3
Wildfire risk in western suburbs
Coverage Recommendations
Wind/hail coverage with separate deductible (typically 1-2% of dwelling) — critical in North Texas
Flood insurance essential in Houston, coastal areas, and low-lying zones (separate NFIP or private policy)
Named storm deductible for Gulf Coast properties (2-5% of dwelling coverage)
Umbrella liability policy ($1M+) for rental properties given storm-related liability
Cost Seg + Insurance Connection

Texas's high insurance costs make accurate building valuation essential. A cost segregation study provides component-level documentation that supports precise replacement cost estimates — helping you avoid both over- and under-insurance while substantiating claims after storm damage.

Revenue Comparison

STR vs. Long-Term Rental in Austin

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

Long-Term Rental
Monthly Rent (3BR)$2,300
Annual Gross$27,600
Vacancy Rate5%
Net Annual$26,220
Tenant StabilityTech professionals average 18-month leases with strong renewal rates. High income tenants maintain properties well.
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 Rate68%
Annual Gross Revenue$48,399
Net Annual (after expenses)$36,299
Management20-25% of gross
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

Austin's STR regulations are the tightest in Texas, but Type 3 (commercial zone) STRs remain viable. For most investors, the LTR play is stronger here — premium tech tenants paying $2,300/mo with $40K in Year 1 cost seg savings create exceptional after-tax returns.

Market Fundamentals

Economy & Housing Demand in Austin

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

Median Income
$88,000
Rent-to-Income
25%
Healthy ratio
Vacancy Rate
4.8%
Pop. Growth
+2.0% annually
Major Employers
1
Tesla Gigafactory (15K+)
2
Apple (6K+)
3
Samsung (3K+)
4
Dell Technologies (13K+)
5
University of Texas (25K+)
6
Amazon (6K+)
7
Google (3K+)
Top Industries
Technology
Government
Education
Healthcare
Clean Energy
Landlord & STR Rules
Landlord Friendliness
Friendly (state law overrides local attempts at regulation)
Eviction Timeline
21-30 days
STR Regulation
Restricted — Varies by license type

Austin has the most restrictive STR rules in Texas. Type 1 (owner-occupied) STRs are widely permitted. Type 2 (non-owner-occupied, residential zones) are limited and have been subject to phase-outs. Type 3 (commercial zones) are permitted.

Why Invest Here

Austin is the #1 tech migration destination in America. Tesla's Gigafactory, Apple's $1B campus, and Oracle's relocated HQ anchor a tech ecosystem that adds 50K+ jobs annually. The $480K median price is higher than other Texas metros but comes with the strongest appreciation trajectory in the state.

Where to Invest

Top Neighborhoods in Austin

#1
Round Rock / Cedar Park
Fast-growing suburbs with Dell HQ, excellent schools, and family appeal
Price
$420K
Rent
$2,200
Yield
6.3%
Dell's 13K-employee HQ and proximity to Apple/Tesla campuses drive strong rental demand. Williamson County schools consistently rank among the best in Texas. Newer construction (2010s+) yields excellent cost seg results.
$420K$2,2006.3%
Dell's 13K-employee HQ and proximity to Apple/Tesla campuses drive strong rental demand. Williamson County schools consistently rank among the best in Texas. Newer construction (2010s+) yields excellent cost seg results.
Dell's 13K-employee HQ and proximity to Apple/Tesla campuses drive strong rental demand. Williamson County schools consistently rank among the best in Texas. Newer construction (2010s+) yields excellent cost seg results.
#2
Kyle / Buda
Affordable corridor south of Austin with Gigafactory commuter appeal
Price
$350K
Rent
$1,900
Yield
6.5%
Kyle is the fastest-growing city in the Austin metro, driven by Tesla Gigafactory commuters and affordability. Entry prices 25% below the metro median with strong rental demand.
$350K$1,9006.5%
Kyle is the fastest-growing city in the Austin metro, driven by Tesla Gigafactory commuters and affordability. Entry prices 25% below the metro median with strong rental demand.
Kyle is the fastest-growing city in the Austin metro, driven by Tesla Gigafactory commuters and affordability. Entry prices 25% below the metro median with strong rental demand.
#3
East Austin / Mueller
Gentrifying urban neighborhood with restaurants, breweries, and creative culture
Price
$520K
Rent
$2,400
Yield
5.5%
East Austin is Austin's hottest gentrification story. Premium rents from tech workers who want walkable urban living. Older homes (1950s-1970s) with renovations yield above-average cost seg rates.
$520K$2,4005.5%
East Austin is Austin's hottest gentrification story. Premium rents from tech workers who want walkable urban living. Older homes (1950s-1970s) with renovations yield above-average cost seg rates.
East Austin is Austin's hottest gentrification story. Premium rents from tech workers who want walkable urban living. Older homes (1950s-1970s) with renovations yield above-average cost seg rates.
#4
Pflugerville / Hutto
Affordable suburban with Samsung fab proximity and family-friendly neighborhoods
Price
$380K
Rent
$2,000
Yield
6.3%
Samsung's $17B semiconductor fab in Taylor and Apple's nearby campus drive tech worker demand. Pflugerville ISD and growing amenities attract families.
$380K$2,0006.3%
Samsung's $17B semiconductor fab in Taylor and Apple's nearby campus drive tech worker demand. Pflugerville ISD and growing amenities attract families.
Samsung's $17B semiconductor fab in Taylor and Apple's nearby campus drive tech worker demand. Pflugerville ISD and growing amenities attract families.
Local Partners

Investor-Friendly Partners in Austin, TX

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

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 Austin, TX?

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Frequently Asked Questions

Cost Segregation FAQ — Austin, TX

How much can I save with cost segregation in Austin, TX?

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On a typical $480K property in Austin, cost segregation can yield approximately $39,960 in Year 1 combined federal and state tax savings at the 37% bracket, with a study ROI of 666%. Overline studies cost $499-$2,000.

What is the property tax rate in Austin?

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The effective property tax rate in Austin is approximately 1.68%. Travis County effective rate of ~1.68%. Williamson County (Round Rock, Cedar Park) is ~1.72%. Property taxes are the primary recurring cost but are offset by zero state income tax and strong appreciation.

Is Austin a good market for real estate investing?

+

Austin is the #1 tech migration destination in America. Tesla's Gigafactory, Apple's $1B campus, and Oracle's relocated HQ anchor a tech ecosystem that adds 50K+ jobs annually. The $480K median price is higher than other Texas metros but comes with the strongest appreciation trajectory in the state.

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

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The average annual homeowner insurance premium in Austin is approximately $2,600. Austin's inland Hill Country location avoids hurricane risk and keeps insurance below Houston and DFW levels. Flash flooding from Hill Country runoff is the primary risk — verify FEMA flood zones.

What are the STR and landlord rules in Austin?

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Austin is rated "Friendly (state law overrides local attempts at regulation)" for landlords. STR regulation: Restricted — Varies by license type. Eviction timeline: 21-30 days. Austin has the most restrictive STR rules in Texas. Type 1 (owner-occupied) STRs are widely permitted. Type 2 (non-owner-occupied, residential zones) are limited and have been subject to phase-outs. Type 3 (commercial zones) are permitted.

Who are the major employers in Austin?

+

Major employers in Austin include Tesla Gigafactory (15K+), Apple (6K+), Samsung (3K+), Dell Technologies (13K+), University of Texas (25K+). Top industries: Technology, Government, Education, Healthcare, Clean Energy.

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