A cost segregation CPA who checks whether you can use the deduction first.
Cost segregation for rental and short-term rental owners, handled as one engagement: the passive loss check, the study, the depreciation schedule and the return. Based in Richmond, Texas, working with investors across Houston and nationwide.
What a cost segregation CPA does
A cost segregation study is a report. It breaks a building into its parts and moves the ones that are not structural into 5, 7 and 15-year property. What that report is worth depends on your tax return, and that is the part a study firm does not handle.
- The passive loss check — whether the bigger loss will reduce your tax this year or sit suspended on Form 8582
- The right type of study — a desk study or an engineer-led study with a site visit, matched to the property and the amount at stake
- Land and building allocation — documented from the appraisal district, an appraisal or the contract, so the starting number holds up
- The depreciation schedule — every reclassified asset placed on your return with the correct life, method and bonus percentage
- Form 3115 — for a property you already own, so the missed depreciation comes through in one year
- The exit — what recapture looks like when you sell, and how a 1031 exchange changes it
We do not refer you out for the study. It is ordered and reviewed inside the engagement, and you pay one fee.
Can you use the deduction?
This is the question that decides whether a study pays, and it is the one most people skip. Rental losses are passive by default. If you earn W-2 income above $150,000 and nothing opens the door, a study only makes your suspended loss bigger.
There are four ways the loss becomes usable: the $25,000 allowance when income is under $150,000, real estate professional status, a short-term rental you materially participate in, or passive income from somewhere else. They are laid out in can rental losses offset W-2 income. We work out which one applies to you before any study is ordered.
What a study does to the numbers
Take a $600,000 rental with 25% of the price allocated to land, which leaves a $450,000 building. A study reclassifies about 25% of it, roughly $112,000, into 5, 7 and 15-year property. For property acquired after January 19, 2025, that portion qualifies for 100% bonus depreciation.
First-year depreciation goes from about $16,000 without a study to roughly $124,000 with one. At a 35% bracket that is around $37,000 less tax in the first year. Typical reclassification runs 20% to 30% of the building for a long-term residential rental and 25% to 40% for a furnished short-term rental. More on the rate rules is in bonus depreciation in 2026.
Properties you bought in an earlier year
You do not have to amend old returns. A look-back study on a property already in service is reported on Form 3115, and all of the depreciation you missed comes through as one catch-up deduction in the current year. The same form fixes a rental that was never depreciated or was set up with the wrong life. The Form 3115 guide walks through the calculation.
When we will tell you not to do one
- The loss cannot be used — no door is open this year and none is likely to open soon
- The building is small — the reclassified amount is too little to justify the fee
- You plan to sell in a few years without an exchange — depreciation on the reclassified parts comes back as ordinary income at sale
A study is a timing strategy. It pays best when you hold for years, exchange into another property, or hold for life. How the payback works is in how to avoid depreciation recapture.
Fees
The planning, the study and the depreciation schedule are quoted together as one fixed fee after the first call, once we know the property and whether the loss is usable. The return is quoted with it.
| Service | Fee |
|---|---|
| Cost segregation study, planning and depreciation schedule | fixed fee, quoted after the first call |
| 1040 with Schedule E — rental properties | from $850 |
| Form 3115 catch-up depreciation | quoted on scope |
For what studies cost across the market, see how much a cost segregation study costs. The full fee schedule has the rest.
Who this suits
- Short-term rental owners who manage the property themselves and want the first-year loss against W-2 income. See short-term rental CPA services
- Buyers closing this year who want the study, the placed-in-service date and the hours log settled before December 31
- Owners of rentals bought in earlier years that were never cost segregated
- Real estate professionals and their spouses, where the loss offsets other income. See the real estate professional status guide
- Investors mid-exchange who want a study on the replacement property. See 1031 exchange CPA services
Common questions
How much does a cost segregation study cost?
Across the market, a desk-based study on a single-family rental runs about $500 to $2,000. An engineer-led study with a site visit runs about $2,500 to $3,500 for a single-family or small multifamily property, and $5,000 to $10,000 or more for larger buildings. Our fee covers the study, the planning and the depreciation schedule together and is fixed after the first call.
Do you do the study or refer it out?
It is part of the engagement. We check whether the loss is usable, order the type of study that fits the property, review it, and put the results on your depreciation schedule and return. You deal with one firm and pay one fee.
Can I do cost segregation on a property I bought years ago?
Yes. A look-back study is reported on Form 3115, and the depreciation you missed in earlier years is deducted in the current year. No amended returns are needed.
Is cost segregation worth it on a single-family rental?
It can be. It depends on the building’s cost, your tax bracket, how long you will hold, and above all whether you can use the loss. We run those numbers before you pay for a study.
Will I have to pay the depreciation back when I sell?
Partly, unless you plan around it. Depreciation on the 5 and 7-year parts is taxed as ordinary income at sale. A 1031 exchange can defer it, and holding the property for life removes it through the basis step-up.
Do you work with investors outside Texas?
Yes. The depreciation and passive loss rules are federal, and most of this work is done remotely. State returns follow the property and are part of the engagement.