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A cost segregation study is an engineering-based analysis that breaks down the components of your property into different IRS asset categories under the Modified Accelerated Cost Recovery System (MACRS). Instead of depreciating your entire building over 27.5 years (residential) or 39 years (commercial), certain components are reclassified into 5-year, 7-year, or 15-year property. Examples of reclassified items include appliances, cabinetry, decorative lighting, flooring, fencing, landscaping, and parking lot paving. With 100% bonus depreciation permanently restored under the One Big Beautiful Bill Act for 2025 and beyond, you can deduct these reclassified amounts entirely in Year 1 on IRS Form 4562. For a typical $500,000 rental property, this can mean $20,000 to $50,000 in accelerated first-year deductions — reported on Schedule E or your K-1 — that would otherwise be spread over decades.

You need five core pieces of information to order a cost segregation study: property address, purchase price, acquisition date, total square footage, and year built. Our smart intake form walks you through each field and takes about 5 minutes to complete. No on-site inspection or site visit is required — our engineering-based methodology uses county assessor records, satellite imagery, and calibrated cost databases to identify and classify building components. You can optionally upload property photos, your HUD-1 or ALTA closing statement, and county tax assessment to improve accuracy, particularly for land value allocation and interior finish levels. These documents help us refine the split between land and depreciable improvements, which directly affects the size of your accelerated depreciation deductions reported on IRS Form 4562. Residential orders typically start at $795.

Yes. Every study we produce follows the IRS Cost Segregation Audit Techniques Guide (ATG), which outlines 13 principal elements the IRS expects in a compliant study. These elements include an engineering-based cost estimation approach, use of recognized construction cost databases like RSMeans, proper MACRS classification of each component, and full reconciliation of allocated costs to the property's depreciable basis. Our reports include detailed component-level depreciation schedules, a methodology section explaining data sources and observation procedures, and a complete cost allocation summary organized by IRS asset class. We recommend having your CPA review the report before filing, and the study is structured so your CPA can directly apply the depreciation schedules to IRS Form 4562. Every report also includes audit support documentation and cost source references in case the IRS requests additional detail.

Reports are prepared after you submit your property details and complete payment through our secure checkout. Most residential studies — including single-family rentals, short-term rentals, condos, and small multifamily properties — are delivered to your email inbox in under 1 hour. Larger or more complex commercial properties (office buildings, retail, industrial, mixed-use) may take up to 24 hours as they involve additional component analysis and cost allocation. Every completed study is a 30+ page PDF that includes component-level depreciation schedules organized by MACRS asset class, an executive summary with Year 1 tax impact estimates, and full methodology documentation. Traditional cost segregation firms typically take 4 to 8 weeks and charge $5,000 to $15,000, so our delivery speed and pricing — starting at $795 — are among the most significant differences in the process.

FF&E stands for Furniture, Fixtures & Equipment — tangible personal property that is not permanently attached to the building structure. For short-term rental investors, this category includes beds, couches, dining tables, TVs, rugs, wall art, coffee machines, patio furniture, linens, kitchen equipment, and small appliances. Under IRS MACRS rules, most FF&E items are classified as 5-year property (some specialized items fall into the 7-year class), and with 100% bonus depreciation now permanent for 2025 and beyond, the entire cost can be deducted in Year 1 on Form 4562. STR investors commonly spend $20,000 to $80,000 furnishing a property, and without a cost segregation study those costs are often lumped into the 27.5-year building depreciation schedule. Our FF&E analysis identifies and separates each qualifying item so you capture the full accelerated deduction in your first tax year of ownership.

Whether STR losses can offset your W-2 income depends on whether you meet the IRS material participation test. For short-term rentals where the average guest stay is 7 days or fewer, the activity is not automatically classified as passive rental income. If you materially participate — generally by spending more than 100 hours on the rental activity and more time than anyone else, or by meeting the 750-hour test — losses from the STR can offset your W-2 wages, self-employment income, and other active income. This is governed by IRC Section 469 and is one of the most significant tax planning strategies available to STR investors. A cost segregation study amplifies this benefit by front-loading depreciation deductions into Year 1, potentially creating a paper loss even on a cash-flow-positive property. We recommend discussing material participation documentation with your CPA, and our reports include the MACRS depreciation schedules your CPA needs to apply these deductions on your return.

Absolutely. You can perform a lookback cost segregation study on any property you currently own, regardless of when you purchased it — whether that was 2 years ago or 20 years ago. The IRS allows you to catch up on all missed accelerated depreciation deductions by filing Form 3115 (Application for Change in Accounting Method) with your next tax return. The cumulative catch-up amount, called a Section 481(a) adjustment, is claimed in a single tax year, which can produce a substantial one-time deduction. You do not need to amend any prior-year returns, and there is no deadline or statute of limitations on when you can request this change. Your CPA files Form 3115 alongside your regular Form 1040 or 1120S, and the adjustment flows through to your Schedule E or K-1. Our study provides the depreciation schedules needed to calculate the exact catch-up amount.

The typical return on investment for a cost segregation study ranges from 30x to 70x the study fee, depending on property type, value, and your tax bracket. For example, a $750,000 short-term rental property might yield $188,000 or more in accelerated depreciation through reclassification of components into 5-year, 7-year, and 15-year MACRS categories. At a 37% federal tax rate, that produces an estimated $69,000 or more in first-year tax savings. Against a study fee of $795, that represents an ROI of over 87x. Even for a more modest $400,000 single-family rental, accelerated deductions of $30,000 to $50,000 are common, producing $8,000 to $18,000 in Year 1 tax impact depending on your bracket. The study fee itself is also tax-deductible as a business expense. Exact pricing is based on your specific property type and purchase price.

No — Cost Seg Smart is not a DIY tool or software platform. We deliver a finished, CPA-ready cost segregation study as a professional 35+ page PDF report. There is no software to learn, no component data to research, and no IRS classifications to figure out on your own. You provide your property details at checkout — address, purchase price, square footage, year built, and acquisition date — and we handle the entire analysis. That includes engineering-based cost estimation using RSMeans construction data, MACRS asset class assignment for every building component, reconciliation of costs to your depreciable basis, and complete depreciation schedules organized by 5-year, 7-year, 15-year, and 27.5-year or 39-year categories. The finished report is emailed directly to your inbox and is structured for your CPA to apply immediately to IRS Form 4562. Some companies sell self-service tools that require you to input and classify your own property data, but we do all of that for you.