Cost Segregation Studies in Texas for Rental Property

Rental-property study coverage in Texas

AE Tax Advisors provides nationwide cost segregation studies coordinated around your property's records and tax situation. Texas has no state income tax, which means all rental income, capital gains, and business income flow through to federal returns without state-level taxation. Texas does levy a franchise (margin) tax on entities with revenue above $2.47 million, but most individual rental property owners fall below this threshold. The effective property tax rate averages 1.60% (among the highest nationally), and there is no state sales tax on residential rent. The state sales tax rate is 6.25%, with local additions pushing combined rates to 8.25% in most metro areas. Texas fully conforms to federal MACRS depreciation and bonus depreciation under the OBBBA.

Austin Metro

Austin's median home price runs approximately $450,000-$500,000, down from the 2022 peak near $600,000 but stabilizing with continued tech-sector growth. East Austin, Mueller, and the South Congress corridor remain hot STR neighborhoods, with well-designed properties generating $50,000-$90,000 in gross annual revenue. Austin enacted a Type 2 STR ordinance requiring a license and restricting non-owner-occupied STRs in some residential zones. The city's Hotel Occupancy Tax (HOT) is 11% plus a 6% state HOT. Austin's 6.25% combined state/local tax rate, booming tech sector, and SXSW/ACL festival demand make it a premier STR market. Properties in Zilker, Travis Heights, and the Domain area command premium nightly rates.

Dallas-Fort Worth

DFW's median home price runs approximately $380,000-$420,000 across the metro. Uptown Dallas, Deep Ellum, Bishop Arts, and the Medical District drive STR demand from corporate travelers, convention attendees, and medical tourism. Fort Worth's Southside, Near Southside, and the Stockyards attract leisure visitors. DFW's combined HOT runs 13-15% depending on the city. Collin County suburbs (Frisco, McKinney, Allen) have seen 40%+ appreciation over five years, while mid-cities like Arlington benefit from AT&T Stadium and Globe Life Field event traffic.

Houston Metro

Houston's median home price of approximately $320,000 makes it the most affordable major Texas metro. The Heights, Montrose, EaDo (East Downtown), and the Galleria area perform well for STRs targeting energy-sector business travelers, Texas Medical Center visitors, and NASA/Clear Lake contractors. Houston charges a 7% city HOT plus the 6% state HOT. No zoning restrictions apply citywide (Houston is famously unzoned), though deed restrictions in specific subdivisions may limit STR use. The Energy Corridor and Katy/Sugar Land suburbs serve mid-term furnished rental demand from oil and gas workers.

San Antonio and Hill Country

San Antonio's median home price around $280,000 makes it one of the most accessible investment markets in the state. The Pearl District, King William, Southtown, and Alamo Heights neighborhoods drive STR demand from Riverwalk tourism and military families at Joint Base San Antonio (Lackland/Randolph/Fort Sam Houston). Combined HOT is approximately 16.75%. The Texas Hill Country (Fredericksburg, Wimberley, New Braunfels, Dripping Springs) is one of the state's strongest vacation rental corridors, with wineries, tubing on the Guadalupe and Comal rivers, and Enchanted Rock driving seasonal demand. A 3BR Hill Country cabin purchased for $400,000 with $30,000 in furnishings typically yields $150,000-$170,000 in eligible cost segregation basis.

Choose the review that fits your property

• Airbnb and short-term rentals: review furnishings, basis, personal use, and participation records.
• Long-term residential rentals: evaluate passive income and suspended losses before projecting immediate savings.
• Duplexes, triplexes, and fourplexes: reconcile shared systems, unit improvements, and any owner-occupied portion.
• Small multifamily: reconcile buildings, common areas, site assets, and each renovation.

The documents that drive a defensible estimate

1. Closing statement, purchase agreement, land-allocation support, and ownership records.
2. Original and current depreciation schedules, service dates, and prior elections.
3. Construction, renovation, and furnishing invoices, photographs, and plans.
4. Booking and personal-use records, participation records, and management agreements where relevant.
5. Tax residency, entity classification, passive income, expected holding period, and planned sale or exchange.

A city name or purchase price alone cannot establish the classification or deduction. Use the complete document checklist before requesting a proposal.

Separate federal depreciation from state treatment

The federal study and the Texas return are separate parts of implementation. The analysis should identify the owner's residency, ownership entity, source of income, relevant tax year, and any state or local filing obligations. Do not assume the federal bonus deduction transfers unchanged to every state return, or that a property location determines the owner's entire tax treatment.

Current federal rules generally permit 100% bonus depreciation for qualifying property acquired and placed in service after January 19, 2025, subject to the applicable requirements and elections. Older properties require the rules for their original dates. The building shell and land do not become bonus-eligible simply because a study is completed.

Have the return preparer confirm the current state instructions and retain separate adjustment schedules where required.

Pricing and feasibility before you order

Published standard pricing: $1 per square foot, with a $2,000 minimum per study. Cost segregation is separately priced from advisory. Confirm scope, complex-property charges, preparer handoff, and Form 3115 or return-preparation fees in writing.

Use the free rental-property calculator for an initial first-year scenario. It is not a component-level report, a determination of loss usability, or a prediction of a refund. Review study cost and proposal questions before ordering.

Frequently asked questions

Sources and next steps

• IRS cost segregation audit technique guide
• IRS Publication 946: depreciation and bonus eligibility
• IRS Publication 925: passive activity and at-risk limitations
• IRS Publication 544: dispositions and recapture

Content updated October 1, 2026. General information only. Apply the rules for the relevant year and facts before filing. Editorial standards.

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