How a Cost Segregation Study Works: From Submission to Tax Return

The process of getting a cost segregation study is much simpler than most investors expect. Here is exactly what happens from the time you submit your property to when your CPA files your taxes.

Step 1: Submit Your Property Details

If your advisor referred you, they can send the property details directly. Standard residential self-service intake asks for:

• Property address
• Purchase price and date placed in service
• Property type (single-family, condo, duplex, short-term rental, etc.)
• Interior and exterior photos
• Any renovation details or improvements

Useful evidence includes purchase and closing records, plans or appraisals where available, interior and exterior photos, and improvement records. The required detail depends on the property; additional evidence supports classification but does not guarantee a larger deduction.

If the property has a rental listing on Airbnb, Zillow, or a similar platform, that link is also useful because listing photos often provide exactly what we need.

Step 2: Engineering-Based Analysis

Once your submission is received and payment is processed, our team conducts the cost segregation analysis. This involves:

• Reviewing your photos and property details alongside public records and satellite imagery
• Identifying each component of the property by category: personal property, land improvements, and structural components
• Assigning each component to its correct IRS MACRS recovery period (5-year, 7-year, 15-year, or 27.5-year)
• Allocating cost basis to each component based on the property's purchase price and the relative value of each component

The methodology follows IRS cost segregation guidance and MACRS classification rules. Every classification decision is documented and supportable.

Step 3: Report Delivery

Standard residential reports target two business days after complete intake and payment. Commercial properties, larger short-term rentals, and complex projects have individually agreed timelines. Reports include:

• A complete asset schedule with each component classified by IRS recovery period
• Cost basis allocations showing how the purchase price is distributed across the asset classes
• The 5-year, 7-year, and 15-year property totals your CPA needs to calculate accelerated depreciation
• Supporting documentation for the methodology and classifications

Your tax preparer reviews the report, determines applicable elections and limits, and applies the findings to the return.

Step 4: Your CPA Applies the Depreciation

You send the completed report to your CPA or tax preparer. They use the reclassified asset schedule to:

Your preparer applies the relevant recovery periods and any eligible bonus depreciation. Residential and commercial buildings can use different schedules. Existing depreciation may also require a separate correction procedure.

Audit Protection

Every Segonomics study includes audit protection. If the IRS or a state taxing authority questions your cost segregation deductions, we provide documentation supporting our methodology and classifications and respond to reasonable written inquiries at no additional charge.

A Standard Residential Timeline

Illustrative timing after complete intake and payment. Commercial and complex projects follow their agreed schedule.

For a referred engagement, confirm the next step with your advisor or contact our team. The residential calculator is available for an initial illustration; commercial studies are reviewed individually.