Cost Seg Smart

What Your CPA Needs to Know
About Cost Segregation

Forward this to your CPA — everything they need to file your accelerated depreciation.

Based on IRS Audit Techniques Guide (2022) and U.S. Tax Court precedent.

Overview

What Is a Cost Segregation Study?

A cost segregation study reclassifies building components from 27.5-year (residential) or 39-year (commercial) property into 5, 7, and 15-year MACRS categories. With 100% bonus depreciation, most of this is deductible in Year 1.

Cost segregation is not an aggressive tax position. It is explicitly supported by the IRS Audit Techniques Guide (2022 revision) and upheld in Tax Court (Hospital Corp. of America v. Commissioner, 1997).

Real Case — Short-Term Rental

$500K Property

Reclassified Depreciation: $130,000

Estimated Year 1 Tax Savings

$50,000

At 37% federal rate. 100% bonus depreciation applied.

Filing

How to File the Deductions

Scenario	Filing Method	Form
Current-year property	Claim on current return — no change in method needed	Form 4562
Prior-year property	Change in accounting method — automatic consent under Rev. Proc. 2015-13 (no IRS approval needed)	Form 3115
Lookback / catch-up	Section 481(a) adjustment on current return — no amended returns needed	Form 3115

Bonus Depreciation

OBBBA — Effective 2025+

The One Big Beautiful Bill Act (July 2025) permanently restored 100% bonus depreciation for property placed in service in 2025 and beyond.

Year

2023

2024

2025+

Bonus %

80%

60%

100%

For lookback studies: The bonus rate is determined by the placed-in-service year, not the year of the study.

Deliverables

What the Report Includes

Component-level depreciation schedules — 5-yr, 7-yr, 15-yr, 27.5/39-yr

Land vs. improvement allocation with methodology disclosure

MACRS class-by-class cost breakdown with IRS asset class references

Executive summary with total accelerated deductions and estimated tax savings

Engineering methodology — RSMeans 2024 cost data, remote observation protocol

Ready for direct attachment to Form 4562 or Form 3115 filing

Review Checklist

What to Verify Before Filing

Land allocation — compare to county assessor records and local market

Component classification — match IRS ATG asset class descriptions

Total accelerated % — typically 15–35% of depreciable basis (residential)

Bonus eligibility — confirm placed-in-service date qualifies under current law

Section 1250 recapture — advise client on recapture implications at sale

Your client can estimate their savings at

costsegsmart.com

Studies start at $795 · Delivered in under 1 hour · IRS ATG-compliant methodology