Cost Segregation Report
Andre TaylorPro Member
Rental Property Investor · Chicago, IL · Member since 2017 · 219 posts · 180 votesCost Segregation Report
Most Popular Reply
Michael PlaksPro Member
Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votesQuote from @Andre Taylor:
Looking for a tax company that does Cost Segregation Reports.
Three cost segregation companies are operated by these three Bigger Pockets experts:
@Bernard Reisz @Yonah Weiss @Julio Gonzalez
Reach out to any of them. And read this post to better understand how cost segregation works: https://www.biggerpockets.com/forums/51/topics/1075919-five-...
38 Replies
- 1yJulius VincentBusiness MemberTax Strategist | CPA, MBA + Wharton FP&A | CFO-Level Planning · Houston, TX · Member since 2025 · 157 posts · 172 votes
Hey @Andre Taylor - Here are a few really good firms I've worked with:
- CSA Partners
- ReSure Financial
- Engineered Tax Services
Horizon Wealth & Tax Advisors510 Reviews - 1yJason MalabuteBusiness MemberAccountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 898 votes
Quote from @Andre Taylor:
Looking for a tax company that does Cost Segregation Reports.
Andre, who do you know that’s already had a cost segregation study done on one of their properties? Think of a fellow investor you trust, and then message them right now. Ask them: who did they use, what did they like, what didn’t they like about that company, and would they recommend them? That’s usually the quickest and most reliable way to find a solid provider.
Malabute & Company CPAs525 Reviews - 1yMichael PlaksPro MemberTax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
Quote from @Andre Taylor:
Looking for a tax company that does Cost Segregation Reports.
Three cost segregation companies are operated by these three Bigger Pockets experts:
@Bernard Reisz @Yonah Weiss @Julio Gonzalez
Reach out to any of them. And read this post to better understand how cost segregation works: https://www.biggerpockets.com/forums/51/topics/1075919-five-...
- 1yYonah WeissPro MemberCost Segregation Expert and Investor · Lakewood, NJ · Member since 2017 · 1k+ posts · 1k+ votes
Quote from @Michael Plaks:
Quote from @Andre Taylor:
Looking for a tax company that does Cost Segregation Reports.
Three cost segregation companies are operated by these three Bigger Pockets experts:
@Bernard Reisz @Yonah Weiss @Julio Gonzalez
Reach out to any of them. And read this post to better understand how cost segregation works: https://www.biggerpockets.com/forums/51/topics/1075919-five-...
Thanks so much for the mention Michael!
- 1yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Michael Plaks:
Quote from @Andre Taylor:
Looking for a tax company that does Cost Segregation Reports.
Three cost segregation companies are operated by these three Bigger Pockets experts:
@Bernard Reisz @Yonah Weiss @Julio Gonzalez
Reach out to any of them. And read this post to better understand how cost segregation works: https://www.biggerpockets.com/forums/51/topics/1075919-five-...
Michael, quick question Doctor tenant wants to buy the building her bizzness is in .. Can Doctor use cost seg when they purchase the building and go from tenant to Owner ??? - 1yMichael PlaksPro MemberTax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
Quote from @Jay Hinrichs:
Michael, quick question Doctor tenant wants to buy the building her bizzness is in .. Can Doctor use cost seg when they purchase the building and go from tenant to Owner ???Jay, I'm just seconding @Sean O'Keefe: yes, he can. Does not matter that he already occupies the building. Now, whether or not it is recommended is case by case.
- 1yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Michael Plaks:
Quote from @Jay Hinrichs:
Michael, quick question Doctor tenant wants to buy the building her bizzness is in .. Can Doctor use cost seg when they purchase the building and go from tenant to Owner ???Jay, I'm just seconding @Sean O'Keefe: yes, he can. Does not matter that he already occupies the building. Now, whether or not it is recommended is case by case.
- 1yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Michael Plaks:
Quote from @Jay Hinrichs:
Michael, quick question Doctor tenant wants to buy the building her bizzness is in .. Can Doctor use cost seg when they purchase the building and go from tenant to Owner ???Jay, I'm just seconding @Sean O'Keefe: yes, he can. Does not matter that he already occupies the building. Now, whether or not it is recommended is case by case.
this doctor is a young doctor and does not have other passive income.. so wanted to make sure she could do this and help her with her income from her practice.. Thats a huge selling point if this is the case. If she has no other passive income then the depreciation is banked up I guess for future use ???
Just not sure how that works with owner operator and no other passive income to offset.. I know with myself as I am 100% RE income I can offset my income in my building business in my lending business etc I dont really have much passive income to speak of compared to income from sale of inventory.
- 1yBernard ReiszPro MemberCPA delivering RE Tax Tools: 1031 Exchange, SDIRA, 401(k), Cost Seg · New York City, NY · Member since 2017 · 581 posts · 563 votes
Honored by the mentions! Thank you @Michael Plaks and @Julius Vincent!
The most important thing I can add to the convo is that having your tax accountant be part of the cost seg process from the get-go is invaluable. There are many Cost Seg considerations that are unique to each investor and these only effectively and efficiently addressed with your tax accountant's input.
- Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes1y
I've heard "Cost Seg Kev" aka Kevin Cawley does a great job for this. PM me if you want his contact info.
- Dr · VA · Member since 2025 · 154 posts · 34 votes1y
commonly, what I noticed that these companies rarely bother themselves to do proper study, just use a ready made sheet, change few numbers and "There you go" with a report.
- 1ySean O'KeefePro MemberCPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 870 votes
Quote from @Andre Taylor:
Looking for a tax company that does Cost Segregation Reports.
With the refresh on 100% Bonus Depreciation, I'm seeing a lot of new cost seg firms, where the owners have little to no experience, popping up and setting up shop.
I'm all for entrepreneurship. However, this is an area where I think experience is important and can have an impact on the quality of the study and by extension tax savings / audit risk.
Would highly recommend getting an unbiased opinion from your tax pro (CPA, EA) on difference in cost seg reports (e.g. self-serve, virtual, onsite), which one is the best solution for your property type, and the risks/rewards.For example, if an REI selects a cheaper report / provider and save $500 on cost seg report fees but this report results in $10k less in bonus depreciation & higher audit risk - you didn't save $500, you likely lost money, this reduced your tax savings and increased your audit risk.
For tax pros, since you're incorporating the cost seg report into the return/planning and advising your client, the quality of the cost seg is an ethical shared responsibility.
.
.
.
*This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.
- Specialist · United States · Member since 2025 · 45 posts · 31 votes1y
Unfortunately, there are no qualifications necessary for individuals or firms who provide cost segregation studies and no required methodologies (approaches/standards) for the studies themselves. This means the accuracy and reliability (quality) of the studies will vary substantially. The non-authoritative IRS Publication 5653 Cost Segregation Audit Technique Guide (ATG) states, "In general, a study by a construction engineer is more reliable than one conducted by someone with no engineering or construction background. However, the possession of specific construction knowledge is not the only criterion. Experience in cost estimating and allocation, as well as knowledge of the applicable tax law are also important criteria." That understood, it is best to work with an individual or firm using the most accurate of the six common approaches as described in the guide. For newly constructed buildings, the Detailed Engineering Approach from Actual Cost Records, and for purchased (previously owned) buildings, the Detailed Engineering Cost Estimate Approach. A "quality" cost segregation study will: 1. "Classify assets into property classes (e.g., land, land improvements, building, equipment, furniture, and fixtures); 2. Explain the rationale (including legal citations) for classifying assets as either IRC Section 1245 or Section 1250 property; and 3. Substantiate the cost basis of each asset and reconcile total allocated costs to total actual costs. A quality study will adhere to the 13 Principal Elements of a Quality Cost Segregation Study.
In addition to the considerations above when researching and selecting a cost segregation provider, be sure the provider is properly insured (ask for their current Certificate of Liability Insurance). Ask the provider how many years they have been in this business, how many studies they have performed, what areas (states) they serve, what is the delivery time frame, how much time the process will require of you, the number of times their studies have come under review by the IRS, and how many times they had to revise their studies after review. Ask if the fee is all inclusive (includes travel, site inspection, audit defense, follow-up studies for improvements, Form 3115 preparation and filing, and any/all other costs to complete and deliver the studies). Ask if the provider specializes in other tax services (e.g., Tangible Property Regulations, Section 179D Energy Efficient Commercial Buildings Deduction, Section 45L New Energy Efficient Home Credit, R&D Credit, etc.). This is by no means an exhaustive list of questions to ask but the answers to them will give you enough information to narrow down your choices.
- 1yAaron ZimmermanBusiness MemberAccountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
@Andre Taylor - please pm me and I can provide several quality providers that operate in the Chicagoland area.
Brick House CPAs53 Reviews - Huntsville, AL · Member since 2017 · 14 posts · 10 votes1y
So is there a rule of thumb or cost range for a Cost Seg Report for a SFH that is used for a long term rental? I am seeing $500 to $3K in report costs. Seemingly there isn't a ton of difference as long as you got a report. I have talked to my CPA and we qual for a real estate professional and want to use the report to help off set W-2 wages. SFH was only $155K purchase price though. Thoughts?
- 1ySean O'KeefePro MemberCPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 870 votes
Quote from @Tyler Carter:
So is there a rule of thumb or cost range for a Cost Seg Report for a SFH that is used for a long term rental? I am seeing $500 to $3K in report costs. Seemingly there isn't a ton of difference as long as you got a report. I have talked to my CPA and we qual for a real estate professional and want to use the report to help off set W-2 wages. SFH was only $155K purchase price though. Thoughts?
I posted this earlier in the thread - posting again to reiterate my point on differences in cost seg report:
With the refresh on 100% Bonus Depreciation, I'm seeing a lot of new cost seg firms, where the owners have little to no experience, popping up and setting up shop.
I'm all for entrepreneurship. However, this is an area where I think experience is important and can have an impact on the quality of the study and by extension tax savings / audit risk.
Would highly recommend getting an unbiased opinion from your tax pro (CPA, EA) on difference in cost seg reports (e.g. self-serve, virtual, onsite), which one is the best solution for your property type, and the risks/rewards.For example, if an REI selects a cheaper report / provider and save $500 on cost seg report fees but this report results in $10k less in bonus depreciation & higher audit risk - you didn't save $500, you likely lost money, this reduced your tax savings and increased your audit risk.
For tax pros, since you're incorporating the cost seg report into the return/planning and advising your client, the quality of the cost seg is an ethical shared responsibility.
.
.
.
*This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.
- Specialist · United States · Member since 2025 · 45 posts · 31 votes1y
Quote from @Tyler Carter:
So is there a rule of thumb or cost range for a Cost Seg Report for a SFH that is used for a long term rental? I am seeing $500 to $3K in report costs. Seemingly there isn't a ton of difference as long as you got a report. I have talked to my CPA and we qual for a real estate professional and want to use the report to help off set W-2 wages. SFH was only $155K purchase price though. Thoughts?
Study fees will vary based on which approach the provider uses to conduct the study
(see IRS Publication 5653 Cost Segregation Audit Technique Guide for a description of the six most common approaches), the property type (e.g., SFH, multifamily, industrial, office, MOB, etc.), complexity (number of story's, etc.), and the building's cost basis. As a general rule of thumb, properties with a cost basis below $150,000 are not good candidates for cost segregation because, depending on the hold time, cost of land, cost and condition of the 5- and 15-year assets, and the owner's tax rate, there is very little if any cost benefit (ROI). Using the $155K purchase price for the SFH property mentioned above as an example, if the land is 10 percent of the SFH's purchase price, the building basis would be $139,500. Typically, the gross accelerated depreciation benefit resulting from a cost segregation study on SFH's run between 20 and 25 percent of the building's cost basis and the actual net after-tax benefit runs between five and eight percent of the building's basis at the highest federal income tax rate which is currently 37 percent. Again, this is a general rule of thumb. It is best to receive comparative preliminary analyses (estimates) from providers with construction engineering backgrounds, cost estimating and allocation experience, and knowledge of applicable tax laws who use the detailed engineering approach from actual cost records or cost estimates, and adhere to the 13 Principal Elements of a Quality Cost Segregation Study. Always discuss the estimate results with your licensed tax professional before making a decision. - 1ySean O'KeefePro MemberCPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 870 votes
Quote from @Tyler Carter:
So is there a rule of thumb or cost range for a Cost Seg Report for a SFH that is used for a long term rental? I am seeing $500 to $3K in report costs. Seemingly there isn't a ton of difference as long as you got a report. I have talked to my CPA and we qual for a real estate professional and want to use the report to help off set W-2 wages. SFH was only $155K purchase price though. Thoughts?
"Seemingly, there isn't a ton of difference as long as you got a (cost seg) report."
I just finished a consultation with a rental owner that said something similar about cost seg reports and followed it up with "this stuff can't be that hard."
A couple of thoughts on this:
- Bonus depreciation is available on improvements and capital expenses with a useful life of 20 years or less. Items like Concrete generally fall into the > 20 years useful life bucket. If a real estate investor buys a property that’s already built, what skills are needed to determine how much of the purchase price should go to things like Concrete and not be eligible for bonus depreciation? If you don’t have a background/experience in construction / civil engineering / surveyor how would you know how to allocate it?
- Feels like it is important to have the experience and know how to allocate the different building components $ value between things like concrete, landscaping, etc.
- If your cost seg report underestimates or overestimates the amount of purchase price to allocate to + 20 year items. This can increase your tax savings or decrease it. If they overestimate + 20 year buckets, you loss money on tax savings. If they underestimate and you get audited, this exposes you to the risk of having some of the tax savings you received clawed back with penalties and wastes a lot of your time going back and forth with the IRS.
“But the cost seg firm provides audit support so that must mean they know what they’re doing.”
- Not exactly, and do you really want to take the risk on your tax return? If the report is inaccurate the IRS will be asking you for tax savings + penalties back, not the cost seg firm.
“An onsite visit from cost seg firm civil engineer or surveyor isn’t required by the IRS for cost seg firm to prepare the report.”
- Correct, but according to the IRS Publication 5653 Cost Segregation Audit Technique Guide this IRS prefers an “onsite” visit.
- Which study do you think has more audit defensibility? The cost seg report prepared using the IRS’ preferred method or the one that isn’t?
“The firms that provide “onsite” visits can take months to complete the report. This other firm does virtual/self-service and they can have it done in a couple days.”
- Based on the above, is “speed” something that you’re really looking for in a cost segregation report? Accuracy, audit defensibility, and experience should be a priority.
- Another example, do you want the accountant that tells you they can prepare your tax return in 5min or the one that took a day because they had it reviewed multiple times by other CPAs in their firm and took the time to make sure they included everything?
- If you work with a cost segregation firm that actually has an experienced surveyor, civil engineer, or someone with experience in construction look at the property and prepare a report, don’t you think that the report will be more accurate? Accuracy matters for the reasons I mentioned above.
"Seemingly, there isn't a ton of difference as long as you got a report."
There is a big difference. Pay the extra $500 - $1,000 to get a quality report, with high audit defensibility, where the cost seg firm took time to prepare it. This may end up saving you a lot of time, money, and sleep.
.
.
.This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.
- 1yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Sean O'Keefe:
Quote from @Tyler Carter:
So is there a rule of thumb or cost range for a Cost Seg Report for a SFH that is used for a long term rental? I am seeing $500 to $3K in report costs. Seemingly there isn't a ton of difference as long as you got a report. I have talked to my CPA and we qual for a real estate professional and want to use the report to help off set W-2 wages. SFH was only $155K purchase price though. Thoughts?
"Seemingly, there isn't a ton of difference as long as you got a (cost seg) report."
I just finished a consultation with a rental owner that said something similar about cost seg reports and followed it up with "this stuff can't be that hard."
A couple of thoughts on this:
- Bonus depreciation is available on improvements and capital expenses with a useful life of 20 years or less. Items like Concrete generally fall into the > 20 years useful life bucket. If a real estate investor buys a property that’s already built, what skills are needed to determine how much of the purchase price should go to things like Concrete and not be eligible for bonus depreciation? If you don’t have a background/experience in construction / civil engineering / surveyor how would you know how to allocate it?
- Feels like it is important to have the experience and know how to allocate the different building components $ value between things like concrete, landscaping, etc.
- If your cost seg report underestimates or overestimates the amount of purchase price to allocate to + 20 year items. This can increase your tax savings or decrease it. If they overestimate + 20 year buckets, you loss money on tax savings. If they underestimate and you get audited, this exposes you to the risk of having some of the tax savings you received clawed back with penalties and wastes a lot of your time going back and forth with the IRS.
“But the cost seg firm provides audit support so that must mean they know what they’re doing.”
- Not exactly, and do you really want to take the risk on your tax return? If the report is inaccurate the IRS will be asking you for tax savings + penalties back, not the cost seg firm.
“An onsite visit from cost seg firm civil engineer or surveyor isn’t required by the IRS for cost seg firm to prepare the report.”
- Correct, but according to the IRS Publication 5653 Cost Segregation Audit Technique Guide this IRS prefers an “onsite” visit.
- Which study do you think has more audit defensibility? The cost seg report prepared using the IRS’ preferred method or the one that isn’t?
“The firms that provide “onsite” visits can take months to complete the report. This other firm does virtual/self-service and they can have it done in a couple days.”
- Based on the above, is “speed” something that you’re really looking for in a cost segregation report? Accuracy, audit defensibility, and experience should be a priority.
- Another example, do you want the accountant that tells you they can prepare your tax return in 5min or the one that took a day because they had it reviewed multiple times by other CPAs in their firm and took the time to make sure they included everything?
- If you work with a cost segregation firm that actually has an experienced surveyor, civil engineer, or someone with experience in construction look at the property and prepare a report, don’t you think that the report will be more accurate? Accuracy matters for the reasons I mentioned above.
"Seemingly, there isn't a ton of difference as long as you got a report."
There is a big difference. Pay the extra $500 - $1,000 to get a quality report, with high audit defensibility, where the cost seg firm took time to prepare it. This may end up saving you a lot of time, money, and sleep.
.
.
.This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.
I asked this once on this thread sorry to ask again.. can a Doctor tenant who wish's to buy the building they have their business in.. and is not a RE investor .. Can they buy the building and cost seg it first year ? it would be an owner operator situation. - 1ySean O'KeefePro MemberCPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 870 votesYes, if the Doctor owns and operates the building the cost segregation study is an option. Whether or not the Doctor “should or if they can leverage losses generated from cost segregation study to offset non-passive income depends on other factors.
Quote from @Jay Hinrichs:
Quote from @Sean O'Keefe:
Quote from @Tyler Carter:
So is there a rule of thumb or cost range for a Cost Seg Report for a SFH that is used for a long term rental? I am seeing $500 to $3K in report costs. Seemingly there isn't a ton of difference as long as you got a report. I have talked to my CPA and we qual for a real estate professional and want to use the report to help off set W-2 wages. SFH was only $155K purchase price though. Thoughts?
"Seemingly, there isn't a ton of difference as long as you got a (cost seg) report."
I just finished a consultation with a rental owner that said something similar about cost seg reports and followed it up with "this stuff can't be that hard."
A couple of thoughts on this:
- Bonus depreciation is available on improvements and capital expenses with a useful life of 20 years or less. Items like Concrete generally fall into the > 20 years useful life bucket. If a real estate investor buys a property that’s already built, what skills are needed to determine how much of the purchase price should go to things like Concrete and not be eligible for bonus depreciation? If you don’t have a background/experience in construction / civil engineering / surveyor how would you know how to allocate it?
- Feels like it is important to have the experience and know how to allocate the different building components $ value between things like concrete, landscaping, etc.
- If your cost seg report underestimates or overestimates the amount of purchase price to allocate to + 20 year items. This can increase your tax savings or decrease it. If they overestimate + 20 year buckets, you loss money on tax savings. If they underestimate and you get audited, this exposes you to the risk of having some of the tax savings you received clawed back with penalties and wastes a lot of your time going back and forth with the IRS.
“But the cost seg firm provides audit support so that must mean they know what they’re doing.”
- Not exactly, and do you really want to take the risk on your tax return? If the report is inaccurate the IRS will be asking you for tax savings + penalties back, not the cost seg firm.
“An onsite visit from cost seg firm civil engineer or surveyor isn’t required by the IRS for cost seg firm to prepare the report.”
- Correct, but according to the IRS Publication 5653 Cost Segregation Audit Technique Guide this IRS prefers an “onsite” visit.
- Which study do you think has more audit defensibility? The cost seg report prepared using the IRS’ preferred method or the one that isn’t?
“The firms that provide “onsite” visits can take months to complete the report. This other firm does virtual/self-service and they can have it done in a couple days.”
- Based on the above, is “speed” something that you’re really looking for in a cost segregation report? Accuracy, audit defensibility, and experience should be a priority.
- Another example, do you want the accountant that tells you they can prepare your tax return in 5min or the one that took a day because they had it reviewed multiple times by other CPAs in their firm and took the time to make sure they included everything?
- If you work with a cost segregation firm that actually has an experienced surveyor, civil engineer, or someone with experience in construction look at the property and prepare a report, don’t you think that the report will be more accurate? Accuracy matters for the reasons I mentioned above.
"Seemingly, there isn't a ton of difference as long as you got a report."
There is a big difference. Pay the extra $500 - $1,000 to get a quality report, with high audit defensibility, where the cost seg firm took time to prepare it. This may end up saving you a lot of time, money, and sleep.
.
.
.This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.
I asked this once on this thread sorry to ask again.. can a Doctor tenant who wish's to buy the building they have their business in.. and is not a RE investor .. Can they buy the building and cost seg it first year ? it would be an owner operator situation. - 1yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Sean O'Keefe:
Yes, if the Doctor owns and operates the building the cost segregation study is an option. Whether or not the Doctor “should or if they can leverage losses generated from cost segregation study to offset non-passive income depends on other factors.Quote from @Jay Hinrichs:
Quote from @Sean O'Keefe:
Quote from @Tyler Carter:
So is there a rule of thumb or cost range for a Cost Seg Report for a SFH that is used for a long term rental? I am seeing $500 to $3K in report costs. Seemingly there isn't a ton of difference as long as you got a report. I have talked to my CPA and we qual for a real estate professional and want to use the report to help off set W-2 wages. SFH was only $155K purchase price though. Thoughts?
"Seemingly, there isn't a ton of difference as long as you got a (cost seg) report."
I just finished a consultation with a rental owner that said something similar about cost seg reports and followed it up with "this stuff can't be that hard."
A couple of thoughts on this:
- Bonus depreciation is available on improvements and capital expenses with a useful life of 20 years or less. Items like Concrete generally fall into the > 20 years useful life bucket. If a real estate investor buys a property that’s already built, what skills are needed to determine how much of the purchase price should go to things like Concrete and not be eligible for bonus depreciation? If you don’t have a background/experience in construction / civil engineering / surveyor how would you know how to allocate it?
- Feels like it is important to have the experience and know how to allocate the different building components $ value between things like concrete, landscaping, etc.
- If your cost seg report underestimates or overestimates the amount of purchase price to allocate to + 20 year items. This can increase your tax savings or decrease it. If they overestimate + 20 year buckets, you loss money on tax savings. If they underestimate and you get audited, this exposes you to the risk of having some of the tax savings you received clawed back with penalties and wastes a lot of your time going back and forth with the IRS.
“But the cost seg firm provides audit support so that must mean they know what they’re doing.”
- Not exactly, and do you really want to take the risk on your tax return? If the report is inaccurate the IRS will be asking you for tax savings + penalties back, not the cost seg firm.
“An onsite visit from cost seg firm civil engineer or surveyor isn’t required by the IRS for cost seg firm to prepare the report.”
- Correct, but according to the IRS Publication 5653 Cost Segregation Audit Technique Guide this IRS prefers an “onsite” visit.
- Which study do you think has more audit defensibility? The cost seg report prepared using the IRS’ preferred method or the one that isn’t?
“The firms that provide “onsite” visits can take months to complete the report. This other firm does virtual/self-service and they can have it done in a couple days.”
- Based on the above, is “speed” something that you’re really looking for in a cost segregation report? Accuracy, audit defensibility, and experience should be a priority.
- Another example, do you want the accountant that tells you they can prepare your tax return in 5min or the one that took a day because they had it reviewed multiple times by other CPAs in their firm and took the time to make sure they included everything?
- If you work with a cost segregation firm that actually has an experienced surveyor, civil engineer, or someone with experience in construction look at the property and prepare a report, don’t you think that the report will be more accurate? Accuracy matters for the reasons I mentioned above.
"Seemingly, there isn't a ton of difference as long as you got a report."
There is a big difference. Pay the extra $500 - $1,000 to get a quality report, with high audit defensibility, where the cost seg firm took time to prepare it. This may end up saving you a lot of time, money, and sleep.
.
.
.This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.
I asked this once on this thread sorry to ask again.. can a Doctor tenant who wish's to buy the building they have their business in.. and is not a RE investor .. Can they buy the building and cost seg it first year ? it would be an owner operator situation.
thank you for the response. I remember when the go zone hit ( katrina benefits) any business that built a new building and put it in service could write off 100% of the improvements.. so you saw in Jackson MS a huge building boom car dealers doctors attorneys and many others building their own facility. - 1ySean O'KeefePro MemberCPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 870 votes
Quote from @Sean O'Keefe:
Quote from @Tyler Carter:
So is there a rule of thumb or cost range for a Cost Seg Report for a SFH that is used for a long term rental? I am seeing $500 to $3K in report costs. Seemingly there isn't a ton of difference as long as you got a report. I have talked to my CPA and we qual for a real estate professional and want to use the report to help off set W-2 wages. SFH was only $155K purchase price though. Thoughts?
"Seemingly, there isn't a ton of difference as long as you got a (cost seg) report."
I just finished a consultation with a rental owner that said something similar about cost seg reports and followed it up with "this stuff can't be that hard."
A couple of thoughts on this:
- Bonus depreciation is available on improvements and capital expenses with a useful life of 20 years or less. Items like Concrete generally fall into the > 20 years useful life bucket. If a real estate investor buys a property that’s already built, what skills are needed to determine how much of the purchase price should go to things like Concrete and not be eligible for bonus depreciation? If you don’t have a background/experience in construction / civil engineering / surveyor how would you know how to allocate it?
- Feels like it is important to have the experience and know how to allocate the different building components $ value between things like concrete, landscaping, etc.
- If your cost seg report underestimates or overestimates the amount of purchase price to allocate to + 20 year items. This can increase your tax savings or decrease it. If they overestimate + 20 year buckets, you loss money on tax savings. If they underestimate and you get audited, this exposes you to the risk of having some of the tax savings you received clawed back with penalties and wastes a lot of your time going back and forth with the IRS.
“But the cost seg firm provides audit support so that must mean they know what they’re doing.”
- Not exactly, and do you really want to take the risk on your tax return? If the report is inaccurate the IRS will be asking you for tax savings + penalties back, not the cost seg firm.
“An onsite visit from cost seg firm civil engineer or surveyor isn’t required by the IRS for cost seg firm to prepare the report.”
- Correct, but according to the IRS Publication 5653 Cost Segregation Audit Technique Guide this IRS prefers an “onsite” visit.
- Which study do you think has more audit defensibility? The cost seg report prepared using the IRS’ preferred method or the one that isn’t?
“The firms that provide “onsite” visits can take months to complete the report. This other firm does virtual/self-service and they can have it done in a couple days.”
- Based on the above, is “speed” something that you’re really looking for in a cost segregation report? Accuracy, audit defensibility, and experience should be a priority.
- Another example, do you want the accountant that tells you they can prepare your tax return in 5min or the one that took a day because they had it reviewed multiple times by other CPAs in their firm and took the time to make sure they included everything?
- If you work with a cost segregation firm that actually has an experienced surveyor, civil engineer, or someone with experience in construction look at the property and prepare a report, don’t you think that the report will be more accurate? Accuracy matters for the reasons I mentioned above.
"Seemingly, there isn't a ton of difference as long as you got a report."
There is a big difference. Pay the extra $500 - $1,000 to get a quality report, with high audit defensibility, where the cost seg firm took time to prepare it. This may end up saving you a lot of time, money, and sleep.
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.This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.
- 1yBernard ReiszPro MemberCPA delivering RE Tax Tools: 1031 Exchange, SDIRA, 401(k), Cost Seg · New York City, NY · Member since 2017 · 581 posts · 563 votes
@Jay Hinrichs The young doc's tax goal would be take advantage of grouping allowed under 1.469-4 of the regulations. To the extent appliable, those Regs allow the doc to treat his medical practice and building as a single activity, such that income and loss from the grouped activity offset one another.
P.S. I'd guess that1.469-4 is part of what @Sean O'Keefe and @Michael Plaks are alluding to... but as I don't do tax accounting I can let this "cat out of the bag." :) That being said, the devil is in the details, which is why we always strongly recommend that clients' tax accountant (CPA, EA, or other competent tax pro) be involved from the get-go. (On BP, Michael has written the most definitive posts on this topic, to the best of my knowledge.)
- Property Manager · Erie & Millscreek PA | Maggie Valley & Haywood County NC · Member since 2024 · 264 posts · 118 votes1y
- MSC (Measurement Standards Corporation)
One of the largest independent cost segregation firms in the U.S., with over 26,500 studies completed. Nationwide coverage, audit support, and experience working with CPA firms. Cost Segregation Services | MSCCost Segregation Services | MSC -
Engineered Tax Services (ETS)
Leading the industry with about 18% market share, recognized for in-depth, engineering-based studies. Often praised for tax-saving results and smooth service. Global Growth InsightsEngineered Tax Services -
KBKG
Known for comprehensive automation tools and tax incentives expertise. Often cited for integrations with CPA workflows and audit support. Global Growth InsightsKBKG -
CSSI (Cost Segregation Services, Inc.)
Specializes in cost segregation, with over 45,000 studies, particularly for small to mid-sized commercial portfolios. Management.Org -
Duffy+Duffy and Madison SPECS
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Duffy+Duffy: Ideal for LEED-certified or green projects; focused exclusively on cost segregation. Jerusalem Post
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Madison SPECS: Offers remote “Smart Tour” methodology, a tech-driven solution with fast, video-documented audits. Jerusalem Post
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Choosing a Firm: What to Look For
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Free feasibility analysis — validates whether your property qualifies and gives you expected tax savings and a quote. Merchant MaverickNYC Tax Services
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Qualified professionals on staff — ensure studies are done by licensed engineers and tax pros, not just software-generated. PICPACPA Practice AdvisorKBKG
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Audit protection — essential in case the IRS comes knocking. Merchant MaverickKBKG
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Proven experience — ask about their number of completed studies, case studies, and ability to withstand audits. PICPAEngineered Tax ServicesCPA Practice Advisor
- MSC (Measurement Standards Corporation)
- 1yJulius VincentBusiness MemberTax Strategist | CPA, MBA + Wharton FP&A | CFO-Level Planning · Houston, TX · Member since 2025 · 157 posts · 172 votes
Great points already shared here, but here are a couple of other things to keep in mind:
- Grouping is a long-term election, so it’s not something to enter lightly.
- Depending on the doctor’s situation, lender covenants or financial reporting may also influence whether showing large paper losses makes sense.
Horizon Wealth & Tax Advisors510 Reviews - 1yMichael PlaksPro MemberTax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
Since you uttered the tricky words "selling point", here comes a warning. Sorry for repeating this very important warning, and it is not directed at you personally, as you already know it.
WARNING: DO NOT give tax advice to your clients, your buyers or your sellers. The correct approach that prevents future complications, including legal complications, is: "Please ask your CPA whether such-and-such tax strategy (ex.: cost segregation) can apply to you under your specific circumstances and how much it can save you." Avoid saying something like "and a great part is that this will allow you to cut your taxes in half."
The disclaimer out of the way, back to your questions:
- can she do cost segregation if she buys the building? Yes
- will it save her any taxes right away? Possibly
- will it keep saving her taxes year after year? Unlikely, it's probably a one-year relief
- is it worth pursuing? Sorry, the answer is case by case - 1ySean O'KeefePro MemberCPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 870 votes
I just finished reviewing a cost seg report from one of these self-service / virtual cost segregation firms, and it's left me with serious concerns about the quality of these reports.
- They used the Rule of Thumb (20/80) to determine the land value on the report when the county assessment for land value was as high as 90% - this property required significant renovations.
- The cost seg report was for an STR, but the report used 27.5 years for the Building's useful life. (the IRS standard for STR is 39 years)
When my client asked for more details on why they used the above methodology, the firm said, "We're not concerned about audit risk", and they had reviewed public records and felt the report was correct.
When I asked them if they’d be reimbursing my client for loss of tax benefits and penalties in the event the cost seg report failed an audit, they very quickly revised the report with county assessment for land value (instead of 20/80), and didn't answer the question on why they selected 27.5 years for a STR or the reasoning behind choosing the Rule of Thumb method.
I would be very cautious in using self-service and virtual reports. I’m reposting some common comments I hear on cost segregation reports below.
"Seemingly, there isn't a ton of difference as long as you got a (cost seg) report."
A couple of thoughts on this:
- Bonus depreciation is available on improvements and capital expenses with a useful life of 20 years or less. Items like Concrete generally fall into the > 20 years useful life bucket. Suppose a real estate investor buys a property that’s already built. What skills are required to determine the allocation of the purchase price between items like Concrete and those that are not eligible for bonus depreciation? If you don’t have a background/experience in construction / civil engineering / surveyor how would you know how to allocate it?
- It seems essential to have experience and know how to allocate the value of different building components between items like concrete and landscaping.
- If your cost seg report underestimates or overestimates the amount of purchase price to allocate to + 20 year items. This can increase your tax savings or decrease it. If they overestimate + 20 year buckets, you loss money on tax savings. If they underestimate and you get audited, this exposes you to the risk of having some of the tax savings you received clawed back with penalties and wastes a lot of your time going back and forth with the IRS.
“But the cost seg firm provides audit support so that must mean they know what they’re doing.”
- Not exactly, and do you really want to take the risk on your tax return? If the report is inaccurate the IRS will be asking you for tax savings + penalties back, not the cost seg firm.
“An onsite visit from cost seg firm civil engineer or surveyor isn’t required by the IRS for cost seg firm to prepare the report.”
- Correct, but according to the IRS Publication 5653 Cost Segregation Audit Technique Guide this IRS prefers an “onsite” visit.
- Which study do you think has more audit defensibility? The cost seg report prepared using the IRS’ preferred method or the one that isn’t?
“The firms that provide “onsite” visits can take months to complete the report. This other firm does virtual/self-service and they can have it done in a couple days.”
- Based on the above, is “speed” something that you’re really looking for in a cost segregation report? Accuracy, audit defensibility, and experience should be a priority.
- Another example, do you want the accountant that tells you they can prepare your tax return in 5min or the one that took a day because they had it reviewed multiple times by other CPAs in their firm and took the time to make sure they included everything?
- If you work with a cost segregation firm that actually has an experienced surveyor, civil engineer, or someone with experience in construction look at the property and prepare a report, don’t you think that the report will be more accurate? Accuracy matters for the reasons I mentioned above.
There is a big difference in cost seg reports and cost seg firms. Pay the extra $500 - $1,000 to get a quality report, with high audit defensibility, where the cost seg firm took time to prepare it. This may end up saving you a lot of time, money, and sleep.
.
.
.This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.
- 1yMalik JavedBusiness MemberSpecialist · Los Angeles California · Member since 2024 · 90 posts · 38 votes
@Sean O'Keefe Well said!
- 11moJonathan PfluegerPro MemberBen Lomond, CA · Member since 2016 · 338 posts · 337 votes
Looking to have a cost segregation preformed on a property in Oregon, does anyone have someone local they can recommend?
And has anyone used any of the nationwide servicers for cost segregations - I see a few recommended here on the thread? I feel like someone local to Oregon would be a better fit, "nationwide" anything makes me a little nervoud.
- 11moJonathan PfluegerPro MemberBen Lomond, CA · Member since 2016 · 338 posts · 337 votes
I need a cost segregation done on a property we purchased this year in Oregon. I have seen a bunch of recommendations given for “nationwide” cost segregation companies and was wondering if anyone has used them successfully? In my experience anything “nationwide” means they are not experts in my area and only have general knowledge. I have never done a cost segregation before so I may be mistaken.
I was really hoping to find someone local to Oregon to work with. We someone to come out in person to do the study and we want it done right.
- Member since 2019 · 23 posts · 11 votes11mo
@Jonathan Pflueger - KBKG and Source Advisors are 2 Oregon companies that do Cost Segregation. I have not used them personally, but I know a few folks who have.
- Specialist · United States · Member since 2025 · 45 posts · 31 votes11mo
@Amber Clark and @Jonathan Pflueger KBKG is based in California and Source Advisors is based in Texas. Like our firm, both are nationwide providers that have local, regional, and national sales representation, and just as knowledgeable if not more so than the local providers in the markets in which they operate. National firms are the the "gold standard" in terms of quality and price (ROI) and offer additional specialty tax services such as Energy Efficient Commercial Buildings Deduction, New Energy Efficient Home Credit, R&D Credit, etc.
- 11moSean O'KeefePro MemberCPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 870 votes
If you want unbiased advice on which cost seg firms provide high-quality, audit-defensible reports, talk to your tax professional. To ensure it's an impartial referral, ask your tax professional if they're getting a referral fee.
Most cost seg firms will provide "audit insurance" or "audit protection" on their reports, but this doesn’t mean that they will indemnify you or reimburse you for loss of tax benefits if their report fails the audit.
- Specialist · United States · Member since 2025 · 45 posts · 31 votes11moSpot-on, Sean! Although our firm can provide referral fees, I personally do not unless the referrer donates the fee to a charity of their choosing. Perhaps my clients and other referral sources never ask me for referral fees because they feel the same way I do about them. Referral fees are bribes and if I resort to bribing someone for a referral, I didn't earn it and therefore don't deserve it. CPAs must adhere to ET §1.520.001 "Commissions and Referral Fee Rules" of the AICPA's Code of Professional Conduct which states commissions and referral fees are allowable under certain conditions and must be disclosed to the client in writing. The Code also states that CPAs should consider how this may affect their objectivity and future claims or perception of bias.
Quote from @Sean O'Keefe:
If you want unbiased advice on which cost seg firms provide high-quality, audit-defensible reports, talk to your tax professional. To ensure it's an impartial referral, ask your tax professional if they're getting a referral fee.
Most cost seg firms will provide "audit insurance" or "audit protection" on their reports, but this doesn’t mean that they will indemnify you or reimburse you for loss of tax benefits if their report fails the audit.
- 11moSean O'KeefePro MemberCPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 870 votesThanks for sharing.
Quote from @Account Closed:
Spot-on, Sean! Although our firm can provide referral fees, I personally do not unless the referrer donates the fee to a charity of their choosing. Perhaps my clients and other referral sources never ask me for referral fees because they feel the same way I do about them. Referral fees are bribes and if I resort to bribing someone for a referral, I didn't earn it and therefore don't deserve it. CPAs must adhere to ET §1.520.001 "Commissions and Referral Fee Rules" of the AICPA's Code of Professional Conduct which states commissions and referral fees are allowable under certain conditions and must be disclosed to the client in writing. The Code also states that CPAs should consider how this may affect their objectivity and future claims or perception of bias.Quote from @Sean O'Keefe:
If you want unbiased advice on which cost seg firms provide high-quality, audit-defensible reports, talk to your tax professional. To ensure it's an impartial referral, ask your tax professional if they're getting a referral fee.
Most cost seg firms will provide "audit insurance" or "audit protection" on their reports, but this doesn’t mean that they will indemnify you or reimburse you for loss of tax benefits if their report fails the audit.
Alternatively, as another option to paying a referral fee to CPAs or donating to their charity of choice, you could reduce their client's cost segment fee by this amount.
- 11moAshish AcharyaBusiness MemberCPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
Lots of great information on this thread, and I had to join because cost segregation is a great strategy that we recommend often, especially now that bonus depreciation is back at 100%!
That said, there is an important point to keep in mind:
- Amending prior returns: If you haven’t done a cost segregation study on a property you already own, you might not be able to amend previous returns to claim missed bonus depreciation. You need to look into filing Form 3115
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.This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.
INVESTOR FRIENDLY CPA®5241 Reviews - Dr · VA · Member since 2025 · 154 posts · 34 votes11mo
I would recommend gaining a clearer understanding of how cost segregation works and how it aligns with your overall tax planning strategy. When applied appropriately, it can be a powerful tool to accelerate depreciation and improve cash flow.
There are several reputable firms that specialize in cost segregation studies. Engaging with an experienced provider can help ensure the study is thorough, IRS-compliant, and tailored to your specific property and financial situation
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