How our cost segregation engine works

Residential rentals (1–4 units): an in-person visit by an independent field data collector, $595 in the 48 contiguous states and DC, travel included. Alaska and Hawaii are by quote. For commercial and 5+ unit property, an in-person site visit is available as an add-on for $895, travel included, for properties in California, Arizona, Nevada, Oregon and Washington. Exceptional access (islands, remote sites far from an airport) is quoted separately. It is quoted before you accept it and is never part of the study fee. Most residential and small-commercial studies do not need one: the IRS does not mandate an on-site inspection, though its Audit Techniques Guide recommends one, and a remote study is a valid choice where a visit would not change the answer.

Yes. Cost segregation is an IRS-recognized method for assigning a building's cost to its components and depreciating each over its proper recovery period. The IRS publishes an Audit Techniques Guide for its own examiners that describes what a quality study contains, and our studies follow it: component-level detail, the method stated, and depreciation schedules your CPA files with your return. The deductions are timing, not invention: you take depreciation sooner, never more than the property's basis allows.

Most do, because the report is built for them: CPA-ready depreciation schedules, component-level detail, and the methodology stated per the IRS Audit Techniques Guide. We also work with your CPA directly: we answer their technical questions in writing, and get on a call when you or your CPA asks. If your CPA finds an error on our side, we correct it at no charge with no expiration; other changes your CPA asks for to format, documentation or a classification are free for 36 months after first delivery. Acceptance is your CPA's call; the guarantee is that they will have what they need to make it.

Six basic inputs: purchase price, closing date, property address, year built, property type, and any renovation history — the details you collected when you bought the property. A closing statement and photos improve accuracy but are optional for most residential properties, and no blueprints are needed. Most owners finish the intake in about five minutes from memory.

The estimate is a range from the published reclassification band for your property type, built from delivered studies, applied to your purchase price after a land allowance. It is a software-generated figure for deciding whether a study is worth ordering, not a guarantee of any deduction. The study itself works from your actual basis and documentation, and every figure in it is traceable to a component and a cost source.

Every study is a component-level engineering cost estimate, reconciled to your depreciable basis: modeled component quantities priced from a nationally recognized construction cost library, MACRS classification under Rev. Proc. 87-56, and quality checks before release. A licensed professional engineer is engaged for data-center studies, and for commercial studies of $3 million or more when a CPA requires a named engineer, and is named on the cover. Other studies do not carry an engineer's signature; their support is the documented methodology and the component-level detail. The IRS guide says engineer-prepared studies are generally more reliable but prescribes no specific credential.

Yes. The IRS has not established required standards for cost segregation studies, and its Audit Techniques Guide (Pub 5653) does not mandate a site visit, though it recommends a field inspection for quality studies; we offer one as an option where available. We use industry-standard 2026 construction cost data, county assessor records for land allocation, OSM building-type classification, and satellite imagery for site-work verification. Every report includes quality checks and a methodology section that addresses the 13 IRS ATG quality elements. If the IRS questions a study, we respond directly to your CPA at no charge.

Nationally-recognized construction cost databases are the industry-standard cost reference, used by professional engineering firms, government agencies, and insurance underwriters to value building components by region and quality tier. The current edition includes ~30,000 line items priced by city. We use it as the underlying $/SF cost basis for every component classification — appliances, flooring, cabinetry, HVAC, plumbing, structural shell, site work — calibrated by a regional construction-cost multiplier and BLS PPI time index. The same source large engineering firms cite.

Because the methodology has been public and unchanged for years. industry-standard construction cost data, IRS Pub 946 depreciation rules, Rev. Proc. 87-56 asset class lives, and the 2017 IRS Audit Techniques Guide are all open documentation. What used to require a custom engagement per property — discovery calls, site visits, hand-built reports — is now standardizable across thousands of properties using structured property data. The bottleneck wasn't the engineering; it was the labor model. We rebuilt the workflow without changing the methodology.

Land allocation runs through a four-step pipeline: customer override (if specified) → county assessor record (with reliability gate and damping) → metro/state statistical model → national fallback. Coastal markets (Pacific Beach, Manhattan, Coronado) typically run 40–55% land allocation. Inland workforce markets typically run 18–25%. The full reconciliation logic is documented in the report, including which source was used and the reliability tier. For premium-land properties (high-cost metro + high $/SF) the engine applies a floor to prevent unreasonably small depreciable basis.

You forward the examination notice to your CPA, and your CPA forwards it to us. We respond directly to your CPA's questions at no charge — methodology citations, industry-standard cost-data line-item evidence, MACRS classification per component, quality checks. The report is built from the start to address the 13 IRS ATG quality elements (Pub 5653 §3.4). In practice IRS examinations of cost-seg studies are rare for residential and small-commercial properties; when they happen, the response is paperwork, not litigation.

Yes — and they often do. The depreciation schedule, MACRS classification table, and Form 3115 §481(a) section are all line-item editable. Your CPA may adjust for taxpayer-specific factors (passive-activity grouping, REPS election, basis adjustments from §1031 carryover) that aren't in our scope. We provide the engineering basis; they adapt it for your return. If your CPA flags an issue with the report, we'll revise at no charge under our CPA-Ready Guarantee.

It is the page you landed on right after checkout, headed Your order is confirmed: an optional section where you can add photos, closing documents, renovation costs or a furniture and equipment list. Your order confirmation email has an Add photos and details button that opens that same page again. Nothing else is required to build your study, and anything you send before it is built goes into the first version. If you cannot find the confirmation email, write to support@costsegsmart.com with your property address and we will send you the link.

After: photos of the property as it is today, once the work is done.