Lower Your Taxes and Increase Cash Flow

The IRS requires depreciation to be based on your actual cost (tax basis), not the property's current market value or appraised value. This fundamental principle exists because depreciation is designed to recover your actual investment in the property over time. Not to track market fluctuations or potential profits.

Tax law views depreciation as a way to deduct the cost of an asset as it wears out or becomes obsolete through business use. Since you can only "recover" what you actually spent, the calculation starts with your historical cost basis, not what the property might be worth today. If you paid $500,000 for a property that's now worth $700,000, you can only depreciate the $500,000 you actually invested, not the $200,000 in unrealized appreciation.

There's one important exception: when converting personal property to business use (like turning your residence into a rental), you must use the lower of your adjusted cost basis or the fair market value at conversion. This prevents taxpayers from claiming depreciation on personal-use appreciation that occurred before business use began.

Market values matter for other purposes, like allocating purchase price between land and building in an acquisition, or determining asset values in a cost segregation study for used properties, but the total depreciable amount always ties back to your actual cost. This cost-basis system ensures depreciation deductions reflect real economic investment, not paper gains, maintaining the integrity of the tax system while providing predictable, verifiable deductions based on documented purchase prices rather than subjective valuations.

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While our studies are based on engineering analysis and IRS guidelines, we understand you may have questions about specific classifications. If you disagree with certain component classifications, we can review the engineering rationale and supporting documentation. Minor adjustments might be possible if you provide additional information about specific assets or their use. However, significant departures from engineering standards could compromise the study's defensibility.

You can choose to be more conservative than the study recommends by treating some personal property as structural components, though this reduces your tax benefits. We provide detailed documentation explaining each classification decision, which your CPA can review. Remember that our studies include audit defense, so we stand behind our engineering conclusions. If you have specific concerns, it's best to address them before finalizing the study.

The timeline depends on the type of study you choose:

Rapid Report: Once you’ve made the payment and completed the online questionnaire, the process usually takes about 5–10 business days. This includes time for our engineering team to review the information (about 3–5 days) and prepare your final report (around 2 days).

Fully Engineered Study: For a fully engineered analysis, the clock starts after you’ve submitted all the required documents and completed the virtual inspection. From there, the study typically takes about 15–20 business days (roughly 3–4 weeks) — including 10–15 days for the engineering work and 2–3 days to finalize and deliver your report.

If you need results sooner, we also offer a rush option with a 5-business-day turnaround, depending on availability during busier times of the year.

Comprehensive audit support is provided at no additional cost with every study. This coverage includes full IRS audit defense with written responses to any IRS inquiries and expert witness testimony if needed. Our team maintains direct communication with your CPA throughout any audit process and provides complete documentation of our methodology. This support continues for as long as the study remains valid, regardless of how many years pass.

Our track record speaks to the quality of our work, with over 10,000 studies completed and less than 0.1% ever being audited. We maintain a 100% success rate in defending the audits that have occurred. Both Rapid and Engineered reports are equally defensible, and recordings of virtual inspections are available as evidence if ever needed.

The One Big Beautiful Bill Act, signed into law on January 19, 2025, has reinstated permanent 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025, fundamentally changing the landscape for real estate investors. For properties placed in service before January 19, 2025, unfortunately, the prior phase-down schedule remains in effect, meaning these properties receive 60% bonus depreciation if placed in service in 2024, or 40% if placed in service between January 1 and January 19, 2025.

The new 100% rate cannot be applied retroactively to these properties due to the specific effective date provisions in the legislation. However, for properties placed in service after January 19, 2025, the reinstated permanent 100% bonus depreciation applies to all qualified property identified in your cost segregation study, including 5-, 7-, and 15-year property classifications. This permanence eliminates concerns about future phase-downs and makes long-term tax planning more predictable.

R.E. Cost Seg is committed to ensuring all our clients receive maximum value from this law change. All new studies for properties placed in service after January 19, 2025, automatically apply the 100% rate. For studies we completed earlier in 2025 before the law was signed, we provide complimentary updates to the depreciation schedules if your property qualifies for the higher rate. Simply contact our team to request your free updated schedules.

This permanent reinstatement makes cost segregation studies even more valuable, as you can now accelerate the full cost of short-life property into the year placed in service without worrying about diminishing benefits in future years.

We pride ourselves on offering affordable cost segregation studies tailored to every budget and property type. Our self-directed Rapid Report, designed for smaller residential properties up to 4 units with a depreciable basis under $800,000 and capital improvements under $50,000, is available for $950.

For properties that don't meet these criteria and/or require more detailed analysis, our Fully Engineered Study starts at $2,800 for residential properties and $3,325+ for commercial properties. The final fee varies based on square footage, property type, and complexity of the analysis required. Rush service pricing for pending tax deadlines may apply and are subject to capacity availability.

Both services include full IRS audit protection and are performed by qualified engineers following IRS guidelines. To understand exactly what a cost segregation study on your investment property would cost, we provide free proposals that include fee quotes along with estimated depreciation benefits, allowing you to evaluate the return on investment before committing to the study.

Compare our cost segregation study services or request a free proposal for your property here.

Any type of income-producing property placed into service after 1986 qualifies for cost segregation, making this tax strategy widely applicable across the real estate spectrum. We frequently work with both residential properties, including single-family rentals, multi-family buildings, and short-term rentals like Airbnb properties, as well as commercial projects ranging from office buildings and retail centers to industrial facilities and medical offices.

The key requirement is that the property must be used for business or investment purposes rather than as a personal residence. This includes properties you actively manage as rentals, those held for investment appreciation, and buildings used in your trade or business.

Properties acquired through various means including purchases, 1031 exchanges, inheritances, or new construction all qualify, as long as they meet the income-producing requirement and were placed in service after 1986.