Cost Segregation in Tacoma, WA

Seattle's most strategic value play — Tacoma delivers 35% lower entry prices with JBLM military demand, a growing arts scene, and the same zero-state-income-tax advantage that makes Washington a cost seg powerhouse.

Population
900K
Median Home
$430K
Rent (3BR)
$2,200
Property Tax
1.05%
Annual Job Growth
10K+
Ranking
Value Alternative
Overview

Value Props for Investors

MILITARY ANCHOR
JBLM: 40K+ Personnel = Guaranteed Demand

Joint Base Lewis-McChord is the West Coast's largest military installation. 40,000+ active duty and civilian employees with military BAH housing allowances create the most reliable tenant pool in Washington state.

VALUE PLAY
35% Below Seattle with Same Tax Benefits

Tacoma's $430K median price is 35% below Seattle, but you get the same zero-state-income-tax advantage. Your cost seg ROI per dollar invested is significantly higher here than in the Seattle metro.

PORT ECONOMY
Port of Tacoma: Gateway to the Pacific

The Port of Tacoma handles $80B+ in annual trade. Combined with logistics, warehousing, and port employment, it creates a diversified economic base beyond military and tech spillover.

Tax Strategy

Cost Segregation & Tax Rules in Tacoma, WA

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

Cost Seg Overview
State vs. Federal Rules
Tax Landscape
Typical Purchase
$430,000
Building Value
75%
25% land / 75% building
Cost Seg Range
25-38%
of building reclassified
Home Age
40 yrs
Built ~1984
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 Tacoma, typical reclassification rates are 25-38% of building value.

Purchase Price Breakdown
Building 75%$322,500
Land 25%$107,500
Building Value Reallocation (with Cost Seg)
5-Year Property18%
$58,050
15-Year Property12%
$38,700
27.5 / 39-Year (Remaining)70%
$225,750

5 & 15-year components ($96,750 = 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 $430,000 property with 75% building value and 30% reclassification yields ~$35,798 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 1984, Tacoma's housing stock has identifiable components (HVAC, electrical, plumbing, landscaping) that are strong candidates for accelerated depreciation.

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

Washington has no state income tax, so state-level depreciation conformity is not applicable. All cost segregation benefits are captured at the federal level — 100% bonus depreciation on reclassified components.

What This Means for Tacoma Investors: With no state income tax, 100% of your tax savings come from the federal deduction. This simplifies planning — no state addback rules, no conformity concerns, just pure federal savings at your marginal rate.

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

Section 179 applies at the federal level only — WA has no income tax. Washington's 7% capital gains tax (on gains over $250K) does not apply to real estate transactions, keeping cost seg benefits purely at the federal level.

Key Takeaway

A $560K property with a $403K depreciable basis and 30% cost seg reclassification yields ~$44,755 in federal tax savings in Year 1. With no state income tax, there are no state-level deductions or addbacks to track — simplifying your tax strategy significantly.

Bottom Line

Washington's zero state income tax means all cost seg benefits are federal. The simplicity is an advantage — no state addback rules, no conformity concerns, no deferred state deductions. Your entire tax savings are immediate and federal.

Local Property Tax
1.05%
Tacoma effective rate
Transfer Tax
1.1% - 3.0% Real Estate Excise Tax (REET), graduated by sale price
State Income Tax
None
No State Income Tax
Property Tax Details

Pierce County effective rate of ~1.05% is slightly above the state average but still moderate nationally. Property taxes are the primary ongoing cost to factor into cash flow projections.

Assessment Methodology
MethodMarket value with 1% annual levy growth limit
Reassessment CycleAnnually (physical inspection every 4-6 years)
Assessment BodyCounty Assessor
Appeal WindowJuly 1 of the assessment year (or 60 days after notice)
Appeal Success Likelihood
Good
LowModerateGoodVery High

Washington's 1% annual levy growth limit provides structural protection for taxpayers. King County (Seattle) uses an automated valuation model that can create disparities in unique or high-value properties. The Board of Equalization provides a free appeal process. Successful appeals in King County can yield significant savings given high property values.

Work with Overline — Our team helps Tacoma 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 Tacoma, WA

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

Typical Tacoma, WA Property Details
$
50%95%
5%35%
2%25%
Total Reclassified30% of building
10%37%
Estimated Year 1 Tax Savings
Building Value$322,500
$430,000 x 75%
Normal Annual Depreciation$11,727
$322,500 ÷ 27.5 yr (residential)
5-Year Reclassified$58,050
15-Year Reclassified$38,700
Total Accelerated$96,750
30% of $322,500 building value
Federal Tax Savings (Year 1)$35,798
$96,750 x 37% bracket
Total Year 1 Tax Savings$35,798
8.3x normal annual deduction captured in Year 1

WA State Tax: With no state income tax, 100% of your tax savings come from the federal deduction. This simplifies planning — no state addback rules, no conformity concerns, just pure federal savings at your marginal rate.

Insurance & Risk

Insurance Landscape in Tacoma

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

Avg. Annual Premium
$1,300
Tacoma average
State Average
$1,400
39% below average
National Average
$2,300
for comparison
Key Risk Drivers
1
Earthquakes
2
Heavy rain and flooding
3
Lahar risk from Mt. Rainier (limited areas)
Coverage Recommendations
Earthquake insurance recommended (not included in standard policies) — separate deductible of 10-25%
Flood insurance for properties near rivers and low-lying areas
Standard homeowner's policy with replacement cost coverage
Umbrella liability ($1M+) for rental properties
Cost Seg + Insurance Connection

Washington's low base insurance costs boost cash flow, but earthquake risk is the hidden variable. A cost seg study documents component values that support accurate replacement cost estimates — critical for earthquake coverage where deductibles are percentage-based.

Revenue Comparison

STR vs. Long-Term Rental in Tacoma

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

Long-Term Rental
Monthly Rent (3BR)$2,200
Annual Gross$26,400
Vacancy Rate4.2%
Net Annual$25,291
Tenant StabilityHigh — military families and healthcare workers provide stable 12-24 month leases
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$155
Occupancy Rate68%
Annual Gross Revenue$38,470
Net Annual (after expenses)$26,929
Management20-25%
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

Tacoma's military demand creates a unique STR niche — short-term assignments, PCS moves, and contractor stays drive consistent occupancy. Combined with $35.8K in Year 1 federal cost seg savings, the investment math outperforms many higher-priced markets.

Market Fundamentals

Economy & Housing Demand in Tacoma

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

Median Income
$72,000
Rent-to-Income
28%
Healthy ratio
Vacancy Rate
4.2%
Pop. Growth
+1.4% annually
Major Employers
1
Joint Base Lewis-McChord (40K+)
2
MultiCare Health (10K+)
3
State Farm (3K+)
4
CHI Franciscan (8K+)
5
Amazon (growing)
6
Port of Tacoma (5K+)
Top Industries
Military & Defense
Healthcare
Logistics & Port
Technology
Education
Landlord & STR Rules
Landlord Friendliness
Moderate
Eviction Timeline
45-75 days
STR Regulation
Permitted with business license

Tacoma allows STRs with a city business license and lodging tax collection. Less restrictive than Seattle. Military families on short-term assignments and JBLM contractors create unique STR demand.

Why Invest Here

Tacoma is Seattle's premier value play. JBLM (the West's largest military base) guarantees 40,000+ tenants with military BAH housing allowances — recession-proof demand. At $430K median — 35% below Seattle — with $2,200 rents, the cash flow math works immediately. No state income tax amplifies your $35.8K in Year 1 federal cost seg savings.

Where to Invest

Top Neighborhoods in Tacoma

#1
Stadium District / North End
Historic neighborhood with waterfront views and walkable streets
Price
$480K
Rent
$2,400
Yield
6.0%
Tacoma's most desirable area with strong appreciation trajectory. Pre-war homes with renovated systems yield excellent cost seg reclassification rates.
$480K$2,4006.0%
Tacoma's most desirable area with strong appreciation trajectory. Pre-war homes with renovated systems yield excellent cost seg reclassification rates.
Tacoma's most desirable area with strong appreciation trajectory. Pre-war homes with renovated systems yield excellent cost seg reclassification rates.
#2
University Place
Suburban family community near JBLM with top schools
Price
$450K
Rent
$2,300
Yield
6.1%
Military family demand creates near-zero vacancy. Newer construction (1990s-2010s) has abundant reclassifiable components for cost seg.
$450K$2,3006.1%
Military family demand creates near-zero vacancy. Newer construction (1990s-2010s) has abundant reclassifiable components for cost seg.
Military family demand creates near-zero vacancy. Newer construction (1990s-2010s) has abundant reclassifiable components for cost seg.
#3
Lakewood / JBLM Corridor
Military-adjacent community with strong rental demand
Price
$370K
Rent
$2,000
Yield
6.5%
Highest yield in the Tacoma metro. JBLM BAH rates directly support rental pricing. Best cash-flow play for military housing investors.
$370K$2,0006.5%
Highest yield in the Tacoma metro. JBLM BAH rates directly support rental pricing. Best cash-flow play for military housing investors.
Highest yield in the Tacoma metro. JBLM BAH rates directly support rental pricing. Best cash-flow play for military housing investors.
#4
Hilltop
Rapidly revitalizing urban neighborhood with light rail access
Price
$380K
Rent
$1,900
Yield
6.0%
Tacoma's biggest gentrification story. Light rail extension is driving investment and appreciation. Low entry prices with strong upside potential.
$380K$1,9006.0%
Tacoma's biggest gentrification story. Light rail extension is driving investment and appreciation. Low entry prices with strong upside potential.
Tacoma's biggest gentrification story. Light rail extension is driving investment and appreciation. Low entry prices with strong upside potential.
Local Partners

Investor-Friendly Partners in Tacoma, WA

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

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 Tacoma, WA?

Partner With Overline
Frequently Asked Questions

Cost Segregation FAQ — Tacoma, WA

How much can I save with cost segregation in Tacoma, WA?

−

On a typical $430K property in Tacoma, cost segregation can yield approximately $35,798 in Year 1 combined federal and state tax savings at the 37% bracket, with a study ROI of 651%. Overline studies cost $499-$2,000.

What is the property tax rate in Tacoma?

+

The effective property tax rate in Tacoma is approximately 1.05%. Pierce County effective rate of ~1.05% is slightly above the state average but still moderate nationally. Property taxes are the primary ongoing cost to factor into cash flow projections.

Is Tacoma a good market for real estate investing?

+

Tacoma is Seattle's premier value play. JBLM (the West's largest military base) guarantees 40,000+ tenants with military BAH housing allowances — recession-proof demand. At $430K median — 35% below Seattle — with $2,200 rents, the cash flow math works immediately. No state income tax amplifies your $35.8K in Year 1 federal cost seg savings.

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

+

The average annual homeowner insurance premium in Tacoma is approximately $1,300. Tacoma benefits from low insurance costs. Earthquake insurance is recommended but optional — adds $800-2,000/year. Standard policies cover wind, rain, and most common risks. Mt. Rainier lahar risk is real but affects only specific river valleys.

What are the STR and landlord rules in Tacoma?

+

Tacoma is rated "Moderate" for landlords. STR regulation: Permitted with business license. Eviction timeline: 45-75 days. Tacoma allows STRs with a city business license and lodging tax collection. Less restrictive than Seattle. Military families on short-term assignments and JBLM contractors create unique STR demand.

Who are the major employers in Tacoma?

+

Major employers in Tacoma include Joint Base Lewis-McChord (40K+), MultiCare Health (10K+), State Farm (3K+), CHI Franciscan (8K+), Amazon (growing). Top industries: Military & Defense, Healthcare, Logistics & Port, Technology, Education.

See Your Savings

Find Out How Much You Could Save in Tacoma, WA

Enter your property address to get an AI-powered cost segregation estimate in 60 seconds.