Cost Segregation Firm Recommendations?

Question

I have a single STR and will need to get a cost segregation study (specifically an engineering study) done for this year. Looking for recommendations on cost seg firms and any tips from those who have been through the process. Thanks!

Michael Plaks · Answer

The most critical tip is to start by determining whether (and also when) cost segregation can help you in your particular situation:https://www.biggerpockets.com/forums/51/topics/1075919-five-...

Once you determined that it can indeed help you, contact these BP experts, each one of them operates a reputable full-service cost segregation firm:  @Bernard Reisz, @Yonah Weiss, @Julio Gonzalez

Sagiv O. · Answer

For a single STR, you'll want a firm that specializes in residential properties and offers competitive pricing for smaller studies. A few things to look for when getting quotes:

1. Ask if they include the Form 3115 in their fee - some charge extra for the accounting method change form

2. Check if they provide an estimate of benefits upfront so you can verify ROI before paying

3. Make sure they're doing an engineer-based study, not just applying generic percentages

4. Ask about their audit defense - do they stand behind their work if questioned?

For California STRs specifically, land values can eat into your benefit significantly depending on location, so make sure they're using accurate land/building splits. Most firms will give you a free consultation and ballpark estimate.

Pricing for a single residential property usually runs $2k-4k depending on complexity. If the study shows you'd get $30k+ in accelerated depreciation and you can actually use those losses this year, it pays for itself quickly.Another options is to try the modern DYI software tools like Room42.io

Joseph Mudd · Answer

Good morning Wayne;

My recommendation is to start with a tax firm with either in-house engineers or have a relationship with outside engineers.  After defending a few dozen studies before the IRS, it's my experience that engineering only firms don't understand the mechanincs of the passive activity, at-risk or basis rules well enough to advise clients on STR properties.  They know cost segregation and will prepare a very complete, comprehensive, well documented study regardless of whether the taxpayer can use the deductions or not.

Let me know if you would like some recommendations and I can forward you some contacts.

Joe

Bernard Reisz · Answer

@Michael Plaks Honored by the favorable mention! Thank you!

@Wayne Wollesen Great tips in this forum regarding understanding the context in which Cost Seg is done and how it may or may not impact the bottom line on your tax return depending on material participation, real estate professional tax status, classification as short-term rental, substantial services, etc. The very best content regarding all that is, hands-down, that of Michael Plaks (who commented above). He linked to you one of his highly informative BP posts, but there are few additional one that are recommended reading.

Sean Graham · Answer

Thanks for the shoutout @Michael Plaks ;)@Wayne Wollesen let me know if there is anything we can help you with.

Reyjie Sobebe · Answer

I’ve been through this with a single STR and my biggest takeaway is to prioritize firms that actually deliver a true engineering-based study (site visit or detailed substantiation), not just a spreadsheet. A few of the well-known groups like KBKG, Cost Segregation Guys, and ReCost Seg were solid in terms of explaining assumptions and working smoothly with my CPA. My advice is to ask how they defend their classifications, what audit support looks like, and whether they’ve handled STR-specific scenarios before. Also, make sure you’re clean on material participation and documentation going in having that buttoned up ahead of time made the whole process much less stressful and gave me confidence I could stand behind the numbers if ever questioned.If you’re prepping for REP status, start tracking your hours now so it’s easy to document later. We built a free REPS Status tracker sheet to help investors do just that — happy to DM you the link if you’re interested.

Rohullah Sharifi · Answer

I would recommend carefully considering several key points before deciding to move forward with a cost segregation study. First, evaluate your income bracket to determine whether the accelerated deductions will provide meaningful tax benefits. Second, understand that cost segregation is not “free money”—it is simply a method of accelerating depreciation, which reduces your basis over time. Finally, be aware that you may face depreciation recapture when selling the property, which can impact your overall tax outcome.

If you choose to proceed, we can assist you with the cost segregation process.

Sean O'Keefe · Answer

Great thread here https://www.biggerpockets.com/forums/51/topics/1258422-cost-...with different perspectives on which cost seg (self-service, virtual, onsite) might be best for you and your property.

Julio Gonzalez · Answer

Thank you for the tag @Michael Plaks!

@Wayne Wollesen If you’re looking to get a true engineering-based cost segregation study, you’re absolutely on the right track. That’s the gold standard especially if you want defensible results and maximum accelerated depreciation.I’m the CEO of Engineered Tax Services, and this is exactly what our team specializes in. We can run a free cost segregation analysis on your property so you can see the potential tax benefits before committing to anything. No cost and no obligation, just solid numbers to help you decide.Feel free to reach out to me here on BiggerPockets or contact me directly, and I’ll get you connected with my team.

Rohullah Sharifi · Answer

If you are in a high tax bracket and plan to hold the property for the long term, a cost segregation study can provide significant tax benefits by accelerating depreciation deductions and increasing current cash flow. However, it is important to note that upon the sale of the property, depreciation recapture rules will apply. This means a portion of the previously taken depreciation will be subject to taxation, effectively lowering your adjusted basis in the property and potentially increasing your taxable gain at the time of sale.

Cost Segregation Firm Recommendations?

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