The 2018 and 2023 Denver ADU zoning expansions unlocked detached and attached ADU construction citywide. Engine-derived numbers for a Berkeley SFR + ADU and the depreciation math behind the basis addition.
Before the analysis: the underlying numbers this post draws on come from 5 Denver-area properties run through the Cost Seg Smart engine, same engine that produces real customer studies. Median Year-1 federal savings is $32,517 at the 37% top marginal bracket with 100% bonus depreciation. Reclassification ratio ranges 11.4% to 23.5%.
Denver sits in a structurally clean Colorado tax position for cost segregation, full federal §168(k) conformity, flat 4.40% state rate computed on federal taxable income, no addback. The 100% federal bonus restored under OBBBA flows through to your Colorado return without adjustment, producing combined federal-plus-state Year-1 acceleration of roughly 41.4% of accelerated reclassification dollars at the top federal bracket. The cost-seg case for Denver is unusually clean from a tax-policy standpoint, what shapes the actual ROI is the underlying property mix.Denver is overwhelmingly a fix-and-flip + small-MF + ADU investor market, not an STR market. The City and County of Denver operates...
The remainder of this section drills into the specifics that matter for regulatory specific. The five fixtures we ran through the engine for Denver span $545,000 to $985,000 in purchase price across 5 distinct sub-markets, enough variance to draw real conclusions about which scenarios actually produce cost-seg ROI in this market.
Take the LoHi Bungalow Flip as our anchor example. Purchase price: $825,000. Built 1923, 1850 sqft, SFR, located in LoHi / Highlands (Northwest Denver).
The engine determined land allocation of 27.1% using statistical methodology, producing a depreciable basis of $601,260. Of that, the engine reclassified $52,167 into 5-year personal property (FF&E, decorative finishes, certain electrical), $41,440 into 15-year land improvements (paving, landscaping, hardscape, site lighting), and the rest into the 27.5-Year Residential Real Property structural category.
That produces a total reclassification ratio of 15.6%. At 100% bonus depreciation and a 37% federal marginal bracket, the illustrative Year-1 federal tax savings is $34,635. That's the headline number for this fixture.
Contrast that with Park Hill SFR Investor: $685,000 in Park Hill / Stapleton (Central Park), built 1948. Here the engine produced a reclassification ratio of 16.4%, higher than the previous example.
Why? Two reasons. First, the land allocation profile is different, 28.5% here versus 27.1% for the previous example. Second, the engine's treatment of sfr interacts with the build-year and FF&E density differently across neighborhoods.
The takeaway: in Denver, the per-fixture variance is real. A median number (16.4% reclass) hides meaningful variation across sub-markets and property archetypes.
Colorado conforms to federal §168(k) bonus depreciation. The 100% federal bonus restored under OBBBA reduces both your federal AND Colorado liability in the same year, with no addback or decoupling. Combined with Colorado's flat 4.40% rate computed on federal taxable income, Denver cost-seg studies produce the full federal-plus-state Year-1 acceleration cleanly.
This affects every cost-seg calculation in Denver. Because Colorado conforms, the deduction flows through to your state liability with no friction. Your effective combined federal + state tax rate determines the actual savings dollars.
City and County of Denver Short-Term Rental Ordinance: STR operation is restricted to a host's primary residence with annual registration. Non-primary-residence STR is largely prohibited in Denver city limits. Adjacent jurisdictions with different regimes: Jefferson County (Lakewood, Wheat Ridge, Arvada), no city STR ordinance applies; Adams County (Westminster, Thornton), varies; Arapahoe County (Cherry Creek South, parts of Aurora), varies. STR-intent buyers should verify the property's specific incorporation status. For non-STR investor strategies (fix-and-flip, small MF, ADU LTR), Denver's primary-residence STR restriction is irrelevant, standard §469 passive-loss rules apply, and real-estate-professional status is the typical path to active treatment for high-volume operators. Denver's ADU expansion (2018 zoning amendment plus 2023 expansion) supports detached and attached ADU construction in most SFR zones; ADU rentals operate under standard residential rental rules.
To run this analysis for your specific Denver property: the same engine, with your address, year built, square footage, and renovation history. Studies start at $495 for residential under $300K. Audit defense is included with every Cost Seg Smart study.
For the STR-loophole / W-2 offset side specifically (7-day rule, material participation, REPS-alternative), see costsegw2.com.
To run this analysis for your specific Denver property: the same engine, with your address, year built, square footage, and renovation history. Studies start at $495 for residential under $300K. Audit defense is included with every Cost Seg Smart study.
For the STR-loophole / W-2 offset side specifically (7-day rule, material participation, REPS-alternative), see costsegw2.com.