The right cost segregation company has qualified engineers or certified professionals, uses a method the IRS considers reliable, charges a flat fee, delivers a detailed report, works well with your CPA, and stands behind its work if the IRS asks questions. Use the 10 questions below to compare firms side by side.
This content is not tax or financial advice for you. Please talk with a CPA to find what's right for your situation.
Why the company you choose matters
A cost segregation study can move tens or hundreds of thousands of dollars of deductions into year one. If the study is weak, an IRS examiner can push those deductions back out, with interest and possible penalties. The provider you pick is your first line of defense.
10 questions to ask before you hire
1. Who will actually do the work, and what are their credentials? Look for engineers, construction cost estimators, or a Certified Cost Segregation Professional (CCSP), a credential offered by the American Society of Cost Segregation Professionals.
2. What method will you use? The IRS audit guide considers detailed engineering approaches the most reliable and "rule of thumb" methods the least reliable.
3. Will someone visit the property? Site visits produce stronger documentation. Virtual tours can work for smaller properties.
4. How is your fee structured? A flat fee is standard. Be cautious of fees based on a percentage of your tax savings.
5. Can I see a sample report? A quality report includes methods, photos, asset lists, cost sources, legal citations, and a reconciliation to your cost basis.
6. Do you offer audit support, and is it included? Ask what happens, and what it costs, if the IRS examines the study.
7. Will you prepare or help with Form 3115? This matters for look-back studies on property you bought in earlier years.
8. How many studies have you done on my property type? A firm that mainly does warehouses may not know short-term rentals well, and vice versa.
9. What's your turnaround time? You need the report before your tax filing deadline, including extensions.
10. Will you work directly with my CPA? The best results come when the provider and your CPA coordinate on depreciation schedules and elections.
Red flags
- Guarantees of a specific percentage before reviewing your property
- No named preparer or no credentials listed in the report
- Very short reports with no supporting detail
- Pressure to claim real estate professional status without discussing the requirements
- Refusing to share a sample report
A simple comparison scorecard
When you get quotes, score each firm 1 to 5 on these points:
| Criteria | Firm A | Firm B | Firm C |
|---|---|---|---|
| Credentials of preparers | Score 1–5 | Score 1–5 | Score 1–5 |
| Method and site visit | Score 1–5 | Score 1–5 | Score 1–5 |
| Sample report quality | Score 1–5 | Score 1–5 | Score 1–5 |
| Fee (flat, clear scope) | Score 1–5 | Score 1–5 | Score 1–5 |
| Audit support included | Score 1–5 | Score 1–5 | Score 1–5 |
| Form 3115 help | Score 1–5 | Score 1–5 | Score 1–5 |
| Experience with my property type | Score 1–5 | Score 1–5 | Score 1–5 |
| Turnaround time | Score 1–5 | Score 1–5 | Score 1–5 |
The cheapest quote isn't always the best value. A slightly higher fee for a much stronger report is often worth it.
Frequently asked questions
Should I use a national firm or a local one?
Can I use the firm my CPA recommends?
How many quotes should I get?
See what your property may qualify for
Run our 2-minute STR Qualification Quiz or model your Low / Mid / High cost segregation range.
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Read guideThis content is not tax or financial advice for you. Please talk with a CPA to find what's right for your situation.