Frequently Asked Questions

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.

The recommended holding period to maximize benefits from a cost segregation study is 3-5 years minimum, with 5 or more years being ideal to avoid significant recapture issues. While 2 years is the absolute minimum for smaller properties, shorter holding periods reduce the overall benefit. When you sell a property after accelerated depreciation, recapture rules apply.

Accelerated depreciation taken on personal property is recaptured at ordinary income tax rates, while standard straight-line depreciation is recaptured at a maximum 25% rate. This recapture can be deferred through a 1031 exchange if you're acquiring a replacement property. Despite the recapture considerations, the benefits of accelerated depreciation typically outweigh the recapture tax if the property is held for at least 3 years, due to the time value of money and the deferral benefit.

Whether you need real estate professional status depends on your income sources and how you plan to use your depreciation benefits. To qualify as a real estate professional, you must spend at least 750 hours annually in real estate activities and more than half of your total working time must be in real estate. You also need to materially participate in your rental activities. Achieving this status allows you to offset W-2 income with rental losses, which can be extremely valuable.

However, there's an important alternative for those who can't meet these requirements. If you operate short-term rentals and materially participate with at least 100 hours annually, you can offset active income without achieving real estate professional status. For those who don't qualify under either scenario, passive losses can only offset passive income, though unused losses carry forward indefinitely and can be used in future years.

While audit rates for properly prepared cost segregation studies are extremely low, certain factors may increase IRS scrutiny. Red flags include excessive reclassification percentages that seem unreasonable for the property type, inconsistent treatment across similar properties in your portfolio, poor or missing documentation, use of non-qualified preparers, and overly aggressive land valuations.

Best practices to avoid audit issues include always using qualified professionals with engineering expertise, maintaining detailed documentation of all assumptions and methodologies, following the IRS Cost Segregation Audit Technique Guide, being consistent in your approach across properties, and keeping thorough engineering justification for all reclassifications.

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.

While there's technically no limit to how far back you can perform a look-back study, practical considerations apply. You can capture depreciation from all open tax years, typically the most recent three years, and can even capture benefits from closed years through a Section 481(a) adjustment on Form 3115. However, documentation availability tends to decrease over time, making older studies more challenging.

The cost-benefit analysis becomes less favorable for older properties since depreciation already taken reduces the remaining benefit. The recommended approach is to focus on properties placed in service within the last 15 years, prioritizing higher-value properties first. You should evaluate the remaining depreciable life of the property and confirm that adequate documentation is available before proceeding with older properties.

Depreciation amounts vary significantly based on property type and specific characteristics. Typically, a cost segregation study can reclassify 20-30% of a property's depreciable basis to shorter recovery periods. Residential properties usually see 15-25% acceleration, while commercial properties often achieve 20-35% acceleration.

Properties with significant improvements can see even higher percentages. Several factors affect these results, including land value allocation where lower allocations provide better results, the quality of finishes and fixtures throughout the property, the presence of specialized systems, the amount of site improvements like parking and landscaping, and any recent renovations or capital improvements that have been made.

Bonus depreciation allows immediate expensing of qualifying assets identified in your  property through a cost segregation study. Under current law, known as the Big Beautiful Bill, properties acquired after January 19, 2025, qualify for 100% bonus depreciation through December 31, 2029. This applies to all 5, 7, and 15-year property classifications identified in the study.

For properties acquired before this new law, bonus depreciation followed a phase-out schedule:100% for assets placed in service between 2018 and 2022, 80% for 2023, and 60% for 2024.

If you did not take advantage of bonus depreciation in a prior year, a cost segregation study can still unlock those benefits retroactively. By filing a Form 3115 with the IRS, you can “catch up” on missed depreciation — including bonus depreciation — in the current tax year without amending past returns.