Large Lot Adjustments (>0.5 Acre): More 15-Year Land Improvements

How a lot bigger than 0.5 acre adds basis to the 15-year bucket through site-work assumptions: drainage, grading, paths, perimeter fence, irrigation.

Large Lot Adjustments (>0.5 Acre): More 15-Year Land Improvements

This tutorial covers a single mechanic: how the calculator scales the 15-year land-improvement bucket when lot_acres > 0.5. The reasoning follows the cost-engineering convention that larger residential lots carry more site improvements — graded drainage paths, perimeter walkways, retaining elements, distributed landscaping, longer driveway runs — and those site improvements are land improvements under Pub 946 Asset Class 00.3, eligible for 15-year MACRS.

What the formula actually does

In cost_seg/engine.py, the large-lot adjustment is:

``python if inp.lot_acres > 0.5: pct = min((inp.lot_acres - 0.5) * 0.01, 0.02) ``

Reading the formula:

• A 0.5-acre lot adds 0% (the formula is gated to > 0.5).
• A 1.0-acre lot adds 0.5% to the 15-year class.
• A 1.5-acre lot adds 1.0%.
• A 2.0-acre lot adds 1.5%.
• Anything 2.5 acres or larger hits the 2.0% cap.

The cap exists because beyond about 2 acres the marginal site-work dollars are unlikely to scale linearly with acreage — a 10-acre rural property typically has 2 acres of improved yard around the dwelling and 8 acres of unimproved pasture or woods. The 2% cap reflects that ceiling on the improved-site portion.

Why 15-year and not 27.5-year

Site improvements that exist independently of the building shell — the driveway run from the road, the perimeter fence, the irrigation lines, the graded drainage swale, the walkway from the driveway to the front door — are §1245 land improvements under IRC §168(e)(3)(E)(iv). They depreciate on a 15-year MACRS schedule with 150% declining balance, accept bonus depreciation, and are eligible for the 100% bonus rate currently in effect under OBBBA.

The default depreciation pattern — when no cost-seg study is performed — tends to roll all of these into the 27.5-year residential building schedule, which loses roughly 12 years of accelerated recovery on the affected dollars. The screening calculator's lot-size bump is a coarse proxy for the basis dollars an engineering study would explicitly identify and reclassify.

Worked example — 1.4-acre LTR

A property owner buys a 4-bedroom long-term rental in May 2026 for $625,000 with $130,000 allocated to land, leaving $495,000 of depreciable basis. The lot is 1.4 acres with a paved driveway, perimeter fence, irrigation system, and mature landscaping. The owner enters lot_acres=1.4.

The large-lot bump: (1.4 − 0.5) × 0.01 = 0.9% added to the 15-year class.

Base LTR allocation (10% / 0.5% / 7%) plus the 0.9% lot bump on the 15-year class:

• 5-year: $495,000 × 10% = $49,500
• 7-year: $495,000 × 0.5% = $2,475
• 15-year: $495,000 × (7% + 0.9%) = $495,000 × 7.9% = $39,105
• 27.5-year building: $495,000 × 81.6% = $403,920

At 100% bonus depreciation, the year-1 accelerable deduction is $91,080. Add partial-year mid-month May building S/L of $403,920 / 27.5 × 7.5/12 ≈ $9,180 and the year-1 deduction lands at roughly $100,260. At a 32% bracket, year-1 federal tax effect ≈ $32,080.

The large-lot bump alone is contributing roughly $4,455 of accelerable basis (0.9% of $495,000), which translates to about $1,425 of year-1 tax effect on its own — modest but additive when combined with explicit feature flags (a separate fence-length bump, a separate driveway bump, a separate irrigation flag).

Try a 1.4-acre LTR estimate →

Stacking with explicit feature flags

The questionnaire also collects a fence type with length, a driveway type with length, and irrigation as separate flags. These produce their own bumps:

• fence-iron 200 ft → +1.2% × 1.0 = +1.2% on 15-year (length multiplier capped at 2.0×)
• driveway-concrete 100 ft → +0.5% × 1.0 = +0.5% on 15-year
• irrigation flag → +0.5% on 15-year

A 1.4-acre lot with all three flags ticked adds the lot bump (+0.9%) plus the explicit flags (+2.2%) for a total of 3.1% on the 15-year bucket — roughly $15,300 of additional accelerable basis on a $495,000 depreciable basis. That's about $4,900 of year-1 federal tax effect at 100% bonus and a 32% bracket.

The lot bump and the explicit flags do not double-count in the same way finish_level does on per-item interior upgrades — site improvements are physically distinct, and the calculator treats them additively. A 50% total-reclassification cap applies as a safety valve for exotic stacking, but a normal residential cost-seg estimate stays well below it.

See a 2-acre rural LTR →

Citations

• IRC §168(e)(3)(E)(iv) — 15-year MACRS land improvements.
• IRS Publication 946, Asset Class 00.3 — land improvements definition.
• IRC §168(k)(6) — 100% bonus depreciation, OBBBA permanent.
• IRS Cost Segregation Audit Techniques Guide, Chapter 4 — site work and land improvements.

Disclaimer. This tutorial describes general federal tax concepts. TaxProtestTx (Nought Labs LLC) is a feasibility-screening tool, not tax advice or a cost segregation study. Calculator output cannot be relied on under Treasury Circular 230. Consult a qualified CPA, EA, or attorney before filing. Results are not guaranteed.