Does a Refinance Appraisal Increase My Cost Segregation Basis?
A focused answer for business owners and rental-property owners.
The direct answer
An ordinary refinance appraisal does not generally reset the property’s tax basis to current market value. Depreciation starts from tax basis, including applicable adjustments, rather than the lender’s newest valuation.
How to evaluate your situation
Reconcile original acquisition cost, capital improvements and depreciation already claimed. Loan proceeds and a market-value appraisal answer financing questions, while basis answers a tax accounting question. If refinance proceeds fund a new improvement, that improvement’s supported cost may create a separate basis addition; the borrowing itself is not the addition. Interest treatment may depend on how proceeds are used and should be evaluated separately. A cost segregation study may still be relevant after refinancing, but the study must use the correct property costs and service dates. Do not combine cash received from a loan with depreciation savings as though they arise under the same rule.
Hypothetical example
A rental bought for $500,000 is later appraised at $750,000 during refinancing. The appraisal does not automatically add $250,000 of depreciable basis. A separately documented $40,000 capital improvement is evaluated as an actual addition to basis.
Records to gather
- Original closing
- capital improvements
- depreciation history
- refinance documents
- proceeds use
- new asset service dates
Related question
Can a refinance create a new placed-in-service date for the whole property?
Refinancing alone does not normally place the existing property in service again. New assets or improvements may have their own service dates.
Source and next step
Updated September 30, 2026. This general federal tax discussion does not decide an individual filing position. Apply the current instructions for the actual tax year and your complete facts.
Review the related AE service and bring the listed records to a discovery call.
AE engagement pricing
$7,800 standard advisory engagement. No required recurring annual planning fee. Two $3,900 payments, 30 days apart. Returns, amendments, cost segregation and additional services are separately scoped. See published pricing for the service you need.
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