To Cost Seg or Not... That is the question....
Member since 2024 · 9 posts · 2 votes
To Cost Seg or Not... That is the question....
Most Popular Reply
Sean GrahamBusiness Member
Investor , CPA · Detroit, MI · Member since 2016 · 586 posts · 249 votesHi @Courtney Hamilton, owner of Maven Cost Segregation here, for STRs with heavy renovations and amenities like these, cost segregation usually moves the needle, but only if the depreciation is sized correctly and audit-defensible. A quick and free estimate upfront usually makes it obvious whether a full study is worth paying for.
To answer your questions: here’s what I’ve seen consistently on STRs like this:
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Cost of the study: For a single-family STR, most solid engineering-based studies land somewhere in the mid-four figures, depending on size, location, and complexity. The key isn't price, it's whether the depreciation materially offsets the cost.
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Who to use: Firms that do full engineering studies with site visits and proper documentation tend to be the most defensible. The cheapest option is rarely the one people use again.
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Did it move the needle: When the STR is placed in service correctly, and depreciation is accelerated early, it often meaningfully improves after-tax cash flow, especially for higher earners or active STR owners.
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Model type: For STRs, a full engineering study is usually the safest route if you care about audit defensibility. Desktop or self-assessment models can work in limited cases but tend to leave benefits on the table.
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Red flags / must-haves: Red flags are no site visit, vague asset breakdowns, or no audit support language. You want clear classifications, tied-back costs, and proper documentation.
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Regret selling within 5 years: Regret usually comes from not modeling the exit. When depreciation, recapture, and timing are understood upfront, most investors are glad they did it, even with a shorter hold.
That’s why I usually recommend starting with a free estimate of benefits first, as it quickly shows whether the benefits justify a full study before you commit.
Hope that helps!
Maven Cost Segregation Tax Advisors554 Reviews
13 Replies
- Accountant · Long Island, NY · Member since 2021 · 184 posts · 148 votes8mo
Hello! If you have any questions about cost segregation as it relates to STR, head over to my page and view the post on STRs. We have an active discussion on all things STR, which will include answers to some of your cost segregation study questions you have.
At Aiola, CPA, we reccomend a full engineering study as that will provide you with the best defensibility in the event of an IRS audit.
Regarding "moving the needle" on your taxes that will depend on proper guidance, implementation, and subsequent tax prep. We work with clients daily to reduce tax liability significantly through the use of cost segregation studies.
- 8moAaron ZimmermanBusiness MemberAccountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
I'd recommend connecting with a cpa to see if you will benefit from a cost seg first before doing one. Don't spend money on something where you won't know for sure that you'll get a benefit.
Brick House CPAs53 Reviews - 8moMichael PlaksPro MemberTax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votesBefore you get started, you need to figure out whether cost segregation will create tax savings for you. Because it does not always accomplish it.
Quote from @Courtney Hamilton:
I’m looking at a cost segregation study for a single-family short-term rental (5 bedrooms, hot tub, sauna, recently renovated). Before I get started, I’d love some feedback from those who’ve actually done this on a single STR.
Questions:
- What did you pay for the study (rough range is fine)?
- Who did you use, and would you use them again?
- Did it meaningfully move the needle on your taxes?
- Did you do a self-assessment / engineer-assisted model, or pay for a full engineering study?
- Any red flags, or must-haves in the scope or deliverables?
- Do you regret it (especially if you sold w/I 5 years)?
Trying to balance audit-defensibility with not lighting money on fire. Appreciate any lessons learned.
Here is more:
https://www.biggerpockets.com/forums/51/topics/1075919-five-... @Courtney Hamilton - Great questions. As @Michael Plaks mentioned, figuring out if you'll actually benefit is step one. For a 5BR STR with renovations, you likely have solid depreciable components.
On pricing: traditional engineering firms typically charge $2-5k for residential. For a single property, that can feel steep, but the tax savings often justify it if you can use the deductions now.
One thing worth checking out for smaller residential properties is room42.io - they've built a platform that delivers IRS-defensible studies for around $500. The methodology is rules-based and consistent, which is what matters for audit defense. For a property like yours, you'd likely accelerate $40-60k in depreciation to year 1, which could mean $12-18k in real tax savings depending on your rate.
Re: selling within 5 years - the recapture is at 25%, and you've had use of that cash in the meantime. Most investors I know who did cost seg on STRs don't regret it, especially if they're REPs and can use the losses fully.
- 8moMichael PlaksPro MemberTax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
Quote from @Sagiv O.:
@Courtney Hamilton - Great questions.
Most investors I know who did cost seg on STRs don't regret it, especially if they're REPs and can use the losses fully.
Important technical correction: REPS and STRs are unrelated. REPS is needed for LTRs.
- Member since 2024 · 9 posts · 2 votes8mo
Thanks everyone! I really appreciate the advice.
- Member since 2025 · 10 posts · 1 vote8mo
Hello Courtney, full disclosure I am a Nat'l Sales Rep for CSSI services and have a site with a no cost seg estimator. You can download your results as well. What we suggest at this point is to pull the numbers, take them to your tax advisor and discuss. For RE Investors there is a cap on deductions but not for RE professionals (per the IRS Code). Also the IRS does not look kindly on offshore nor robotic studies for obvious reasons. Some of their studies are cheaper than a proper 3115 document being completed by an onshore firm, which they do not mention until later. Another firm will not do a site survey unless the study comes into question by the IRS. So if you or anyone want the full picture and always have a team of 22 plus onshore analysts to call upon on each and every step of your projects, then feel free to contact me. For projects over $10M that qualify we offer a Zero Cost CS study when implemented with GreenZip technology which doubles your depreciation deductions and is the only IRS approved system. We will always have time for any questions, here or elsewhere.
- CPA| New Clients Welcome| 50 States · Member since 2016 · 440 posts · 94 votes8mo
@Courtney Hamilton, hi. Good questions, and you’re thinking about the right tradeoffs. On single-family STRs, cost seg usually makes sense when income is high enough and you expect to hold more than a couple of years; otherwise recapture can eat up a lot of the benefit if you sell quickly.
Fees are often in the low-to-mid four figures for an engineer-assisted study, but the bigger issue is whether bonus depreciation actually offsets your STR income (or W-2 if you qualify as a real estate professional). I'd focus less on the cheapest provider and more on scope: site visit, asset breakdown, and a defensible report. The "win" is when depreciation meaningfully reduces current tax without boxing you into a bad exit later.
Hi Courtney-
Great question! You are considering doing a cost segregation study on your short-term rental (STR) and want to be thoughtful about it.
We help a lot of investors from around the country build their portfolios of STRs, long-term rentals, multifamily properties, and commercial properties in Michigan. With STRs, clients are doing cost segregations to accelerate depreciation and greatly reduce their active income taxes with 500 documented hours of "material participation" in the management of their property. Cost segregation can be helpful on other property types as well.
We recommend Sean Graham of Maven Cost Segregation. He and his team can help you anywhere in the country determine when and how best to do your cost segregation and what tax savings you can expect for the expense.
To Your Success!
- 8moSean GrahamBusiness MemberInvestor , CPA · Detroit, MI · Member since 2016 · 586 posts · 249 votes
Hi @Courtney Hamilton, owner of Maven Cost Segregation here, for STRs with heavy renovations and amenities like these, cost segregation usually moves the needle, but only if the depreciation is sized correctly and audit-defensible. A quick and free estimate upfront usually makes it obvious whether a full study is worth paying for.
To answer your questions: here’s what I’ve seen consistently on STRs like this:-
Cost of the study: For a single-family STR, most solid engineering-based studies land somewhere in the mid-four figures, depending on size, location, and complexity. The key isn't price, it's whether the depreciation materially offsets the cost.
-
Who to use: Firms that do full engineering studies with site visits and proper documentation tend to be the most defensible. The cheapest option is rarely the one people use again.
-
Did it move the needle: When the STR is placed in service correctly, and depreciation is accelerated early, it often meaningfully improves after-tax cash flow, especially for higher earners or active STR owners.
-
Model type: For STRs, a full engineering study is usually the safest route if you care about audit defensibility. Desktop or self-assessment models can work in limited cases but tend to leave benefits on the table.
-
Red flags / must-haves: Red flags are no site visit, vague asset breakdowns, or no audit support language. You want clear classifications, tied-back costs, and proper documentation.
-
Regret selling within 5 years: Regret usually comes from not modeling the exit. When depreciation, recapture, and timing are understood upfront, most investors are glad they did it, even with a shorter hold.
That’s why I usually recommend starting with a free estimate of benefits first, as it quickly shows whether the benefits justify a full study before you commit.
Hope that helps!Maven Cost Segregation Tax Advisors554 Reviews -
- 8moGian PazziaBusiness MemberSpecialist · Pasadena, CA · Member since 2024 · 38 posts · 15 votes
I've worked on a number of single-family STR cost segs — they can be great candidates if done correctly. A few quick recommendations:
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Confirm it qualifies as residential rental (27.5-year) and watch for any personal use issues.
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Be conservative on interior components (cabinets, sinks, related plumbing/electrical can get scrutiny).
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Lean into the amenities — hot tubs, saunas, exterior lighting, concrete pads, landscaping often drive solid 5- and 15-year allocations.
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Make sure renovation costs are well documented — invoice detail makes a big difference.
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Double-check placed-in-service date and bonus eligibility.
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Sampling doesn’t apply unless you’re dealing with a portfolio.
When structured properly, STRs can sometimes outperform traditional long-term rentals due to amenities and upgrades — just don’t get overly aggressive on structural components.
Hope that helps 👍
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