Don't Order a Cost Seg Study
Until You Ask These 5 Questions
Protect yourself from overpriced, low-quality, or unnecessary studies.
Not all cost segregation studies are equal. The difference between a good study and a bad one can mean tens of thousands in missed deductions — or an IRS challenge you're not prepared for.
1. “Is the study based on engineering analysis or just a template?”
Template-based studies use generic percentages regardless of your property. They don't hold up under IRS scrutiny.
What to look for:
• Component-level cost analysis (not just category percentages)
• RSMeans or equivalent cost database reference
• IRS Audit Techniques Guide methodology
• Property-specific adjustments for age, quality, and location
⚠ Red flag: Every property gets the same reclassified percentage regardless of type or age.
2. “What does the report actually include?”
Your CPA needs specific deliverables to file correctly. A vague summary won't work.
What to look for:
• Component-level depreciation schedules with MACRS class assignments
• Land vs. improvement allocation with documented methodology
• Executive summary with reclassified basis and estimated savings
• Ready for Form 4562 or 3115 — your CPA can file directly
⚠ Red flag: Provider can't show you a sample report before you buy.
3. “How much will I actually save — and is it worth the study cost?”
The study should pay for itself many times over. If it doesn't, you probably don't need one.
What to look for:
• Clear ROI estimate before you commit (10x+ return is typical)
• Transparent pricing — not “contact us for a quote”
• Free calculator or estimate tool to preview savings
⚠ Red flag: Study cost is 50%+ of expected Year 1 savings, or pricing isn't disclosed upfront.