Cost Segregation - Scale?

Question

At what scale does it make sense to start exploring a cost segregation study?  Does the cost of the study scale with the size of the investment?  Who does these (not looking for specific companies), is it accountants, lawyers, agents, and/or contractors?  Seems like an interesting niche...

I had always assumed these were for larger scale commercial investments, but in the recent On The Market episode, Brandon Hall used an example of a $100k property.  Not sure if that was for easy numbers or if this is something that can apply to most six-figure investments.  In my head it's always been a 7+ figure investment tool...

Thanks in advance!

Account Closed · Answer

In my experience, the price of the property isn't what really matters; it's how you're set up tax-wise. I talked to my accountant, and since I qualified as a real estate pro, those cost segregation losses could finally be used to lower my W-2 income. I checked out a few companies and ended up going with Cost Segregation Guys, and their asset breakdown was clear.

Matthew Vanhorn · Answer

The beautiful thing about the cost segregation is that the cost seg company will give you a breakdown of what the cost seg study will cost and the likely benefit of the study before you have to pay for it, so it's a win, then play scenario. Like when I did my last one, the study was going to cost $1600 and the benefit of it was $28,000 in tax savings. I don't know about you, but for me personally, I will trade $1600 for $28,000 as many times as you will let me.  RE Cost Seg is a fantastic company designed for owners of smaller properties. They are able to do it all virtually, which reduces their costs drastically from what it used to cost to get a specialist out to your house to charge tens of thousands. Highly recommend them!

Christian Block · Answer

As suggested, I think the size of the property is a bit irrelevant.

One very important point is if your real estate activity is passive or ordinary.  If you have passive income you are looking to offset with your passive real estate activity, a cost segregation might make sense.  If you do not have other passive activity other than your passive real estate activity, creating a loss with a cost segregation will only create a passive loss that you, likely, will not be able utilize in the year of the cost segregation and will carry forward.

If your real estate activity is ordinary because, for example, you qualify as a real estate professional, the loss created by the cost segregation can offset other ordinary income, creating an immediate tax benefit.

This is definitely something you want to discuss with your CPA.

Bonnie Griffin Kaake · Answer

If you are getting more and more confused by trying to figure out whether or not a cost seg study or other tax benefits would help you with your investments, pick up the phone or send an email. You don't have to know everything. Between a good specialty tax company that does engineering based studies, no cost consulting and your CPA/tax professional, you will save yourself a lot of time and brain damage.

Sagiv O. · Answer

Great question — the 7-figure assumption is outdated now that lower-cost study options exist.

The real threshold isn't about property size, it's about whether you can *use* the losses. A few things to think through:

Property value as a rough guide: Most professionals say $150k–$200k+ purchase price is where it starts to make sense for residential. Below that, the depreciable basis after subtracting land may be too small for the study cost to pencil out.

Tax situation matters more: As others mentioned, if your losses are passive and you can't use them immediately (income over $150k, no REPS or STR material participation), the benefit is deferred. Not worthless, but it changes the math.

Cost of the study scales with complexity — not always property value: Engineering-based studies for commercial or large multifamily run $3k–$10k+. For simpler residential, there are now rules-based software studies (room42.io is one example, around $525) that produce defensible reports without needing a site visit. That lower cost changes the ROI calculation significantly for a $150k–$400k property.

Bottom line: for residential properties in the six-figure range, it's worth running the numbers. The $100k example Brandon Hall used isn't unrealistic — especially if you're holding long-term and can actually utilize the accelerated depreciation.

Bonnie Griffin Kaake · Answer

For properties purchased after Jan 19, 2026, the Bonus Depreciation is now 100% of everything we, as an engineering-based specialty tax firm, identify as 5, 7 or 15 year property. The percentage of bonus depends on the year of purchase and occupancy The 27.5 or 39 year property continues to depreciate over the life of the 27.5-year (residential) or 39-year (commercial and STR) properties.

Lynn Wong · Answer

@Christian Block I just learned about this term today from the Podcast, try to learn about it since I just bought my 1st property in CA of 600K. I will most likely break even. The house is 2 years old and I plan to keep it for a long time. Can I offset my W2 job with the cost segregation study for my rental property so less income tax I need to pay every year? TIA!

Sean Graham · Answer

Hi Tom, owner of Maven Cost Segregation here, Excellent questions. Cost segregation is certainly viable for six-figure investments, not solely 7+ figure properties. While the optimal sweet spot often starts around $200k-$500k, a $100k property can absolutely yield significant tax savings if a good portion (20%+) of the basis can be reclassified to shorter depreciation schedules (5-, 7-, 15-year), especially with bonus depreciation. And the estimate of benefits is free, and you can quickly figure out if it's worth it or not.Hope that helps!

Basit Siddiqi · Answer

Engineering firms perform cost segregation studies.With the cost of Cost segregation studies coming down in recent years, it has made more sense to also apply them to lower cost properties.You should get a cost segregation study done if you anticipate that it will benefit you now or in the near future

Cost Segregation - Scale?

Most Popular Reply