Accessory dwelling units are the small real estate play with an outsized tax engine: high basis per rentable square foot, dense fixture content, and — for 2025–2026 builds — 100% bonus depreciation on the components. Here’s how the pieces fit.
Why ADUs segregate unusually well
A backyard ADU is mostly stuff: kitchen and bath fixtures, appliances, mini-split or HVAC systems, water heater and plumbing runs, laundry, electrical panels, plus 15-year land improvements (walkways, patios, landscaping, the utility trench connecting to the main house). Our modeling table treats a dedicated rental build like this at roughly 30–35% reclassifiable basis — and on new construction the study measures from your actual builder’s accounting rather than a table, which usually lands higher.
Renting the unit also splits your property’s depreciation life in two: the main house (owner-occupied: no depreciation) and the rented ADU (27.5-year shell + accelerated components). Converted spaces — garage-to-ADU, attic buildouts — carry the same logic: the conversion cost detail is the study.
The 2026 rules that make ADU owners money
- 100% bonus, permanent, with a date test. OBBBA made 100% bonus depreciation permanent for property acquired and placed in service after January 19, 2025. For an owner-built ADU, the self-construction test looks at when production began — 2025–2026 starts almost always qualify. For a purchase with an existing or planned ADU, the binding-contract date controls. Place your permit-to-place-in-service dates accordingly, and keep the dates documented the way Notice 2026-11 expects.
- Placed in service ≠ rented. Depreciation begins when the unit is legally occupiable and ready/available for rent — certificate of occupancy or local equivalent, utilities live, advertised. A unit sitting “ready but unleased” for three months has been depreciating for three months.
- The Q4 mid-quarter trap. Finish an ADU in Q4 and all that personal-property-heavy basis (appliances, fixtures, HVAC — plus 15-year site improvements, which count toward the test) can push your annual personal-property placements past 40%, forcing mid-quarter rates on 5/7-year assets. If a finish is near year-end, model both sides before choosing your completion sequence — this single email has saved owners four figures.
How big is the deduction, realistically?
Modeled example: $180,000 detached ADU build, contract/production started spring 2025, rented September 2025, 24% marginal rate, ~32% reclassified (midpoint of our new-build rental table), 100% bonus on the components:
| Without study | With study | |
|---|---|---|
| Depreciable basis (improvements; land alloc. to unit kept small) | ≈ $180,000 | ≈ $180,000 |
| Year-one depreciation | ≈ $6,500 (27.5-yr, mid-month, partial year) | ≈ $64,500 (bonus on ~$57.6K components + shell) |
| Year-one federal tax saved @24% | ≈ $1,600 | ≈ $15,500 |
A study fee from $1,499 (our 24-hour Quick™ tier) or $2,088 (full engineered) returns 7–10× in year one on a build like this — before any Form 3115 catch-up if the unit has been quietly rented since 2023.
Duplex, ADU + main-house rental, and portfolio notes
Two rented units on one parcel is two schedules: the IRS treats each separately, and so do we — batch pricing applies. Owners stacking a short-term-rented ADU (average stays ≤7 days) may convert it into a non-rental trade or business under §469, opening the door to ordinary-income offsets — with the post-2017 rule that spousal hours don’t pool (one spouse must independently clear 750 hours and the >50% test). Model the passive pathway before counting that outcome; the study makes the dollars, the §469 analysis decides whose income they fight.
Send your build’s draw schedule and we’ll price the study the same day — that spreadsheet is the whole ballgame.