Cost segregation study recommendations

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Cost segregation study recommendations

David Sam
Member since 2024 · 1 post · 1 vote

Hi, I bought my first investment property ( new construction  SFM) few months back. I hear that cost segregation study would be beneficial.  The property is <400k so not sure if it us beneficial for me.  If so, any recommendations please. How much would it cost (ballpark) for the study?  Does it need to be completed before end of the year to use it when I do taxes in April 2025? 

Thanks!

David

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Basit SiddiqiBusiness Member
Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
1y

Talk to an accountant prior to doing the cost segregation study.

You want to discuss whether it will be beneficial or not.

In general real estate is considered passive which means that it can't be used to offset other forms of income such as wages, interest, dividends, capital gains, etc.

However, there are some exceptions where the real estate loss can offset these types of income.

best of luck.

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  • Bill HamptonBusiness Member
    Accredited Investment Fiduciary, AIF®, Financial Planner, Tax Strategist, Real Estate Investor · Atlanta, GA · Member since 2012 · 2k+ posts · 978 votes
    1y

    @David Sam

    It depends on a number of factors. 

    Is it a long term rental or short term rental?

    How much is your household income?

    Do you qualify for REPS?

    Do you qualify for the short term rental loophole?

    I recommend that you speak with a real estate accountant to see if you will benefit from a cost segregation first. 

    Good luck. 

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  • Sean GrahamBusiness Member
    Investor , CPA · Detroit, MI · Member since 2016 · 586 posts · 249 votes
    1y
    Quote from @David Sam:

    Hi, I bought my first investment property ( new construction  SFM) few months back. I hear that cost segregation study would be beneficial.  The property is <400k so not sure if it us beneficial for me.  If so, any recommendations please. How much would it cost (ballpark) for the study?  Does it need to be completed before end of the year to use it when I do taxes in April 2025? 

    Thanks!

    David

    Hey Dave! An engineering backed modeling study might be good for this type of property. It just needs to be completed with enough time for your tax CPA to complete your taxes. 

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  • Malik JavedBusiness Member
    Specialist · Los Angeles California · Member since 2024 · 90 posts · 38 votes
    1y

    @David Sam  Congratulations, David! Here is a recent post of mine that addresses your questions:

    Cost Segregation - The Basics (biggerpockets.com)

    You don’t need to complete it before the end of the year to use it for your 2024 taxes. It can be finalized any time before your tax deadline in April 2025. For residential properties with a basis of less than $1.2 million, check out our online DIY Residential Cost Segregator. Be sure to consult with your CPA to determine if you can utilize these deductions based on your specific tax situation.

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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    1y

    Talk to an accountant prior to doing the cost segregation study.

    You want to discuss whether it will be beneficial or not.

    In general real estate is considered passive which means that it can't be used to offset other forms of income such as wages, interest, dividends, capital gains, etc.

    However, there are some exceptions where the real estate loss can offset these types of income.

    best of luck.

    [email protected]917-280-8544
    Basit Siddiqi CPA4.979 Reviews
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  • Julio GonzalezPro Member
    Specialist · West Palm Beach, FL · Member since 2008 · 4k+ posts · 1k+ votes
    1y

    Here's an article with FAQs including the cost of a study. Feel free to reach out if you have any additional questions.

    Cost Segregation FAQ

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  • Nicolas Martin
    Member since 2024 · 52 posts · 25 votes
    1y
    Quote from @David Sam:

    Hi, I bought my first investment property ( new construction  SFM) few months back. I hear that cost segregation study would be beneficial.  The property is <400k so not sure if it us beneficial for me.  If so, any recommendations please. How much would it cost (ballpark) for the study?  Does it need to be completed before end of the year to use it when I do taxes in April 2025? 

    Thanks!

    David


    A cost segregation study can be beneficial for properties under $400k by accelerating depreciation to reduce taxable income. The study typically costs between $3,000 and $8,000. To use it for your 2024 taxes, it must be completed before the end of 2024. Reach out to specialists for a more accurate quote and to discuss your situation.

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    1y

    @David Sam Cost segregation can benefit a property under $400K by accelerating depreciation to offset taxable income, especially if you qualify as a real estate professional or use the short-term rental loophole. Studies typically cost $3,000–$5,000 but affordable DIY options (around $400–$500) exist for simpler properties. The study doesn't need to be completed by year-end but should be done early for 2024 tax filings. Benefits include immediate tax savings via bonus depreciation (60% in 2024), but depreciation recapture tax applies upon sale.

    This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

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