Real estate investors who have never heard about cost segregation from their tax preparer may be losing out on significant tax savings. According to Brian Kiczula, principal of CostSegRx, many CPAs have not updated their approach to cost segregation since it was once too expensive for smaller properties. Consequently, straight-line depreciation remains the default, even though engineering-based studies can now be conducted cost-effectively on smaller residential properties.
Kiczula explains that the traditional cost of a study, often thousands of dollars, made it impractical for CPAs managing clients with modest portfolios. That default stuck, and many CPAs never revisited the strategy because their clients did not push for it. However, what has changed is the availability of detailed engineering studies that are not AI-generated or online calculators. “I’m talking about an engineered study where someone is looking at the property and providing an accurate study back,” Kiczula says.
Another reason cost segregation is not commonly offered is that not all CPAs specialize in real estate investment. Kiczula notes that some tax preparers are not deeply familiar with real estate strategies, or their real estate clients represent a small portion of their book. That does not mean they are bad CPAs, but it does mean investors may need to bring the topic up themselves.
Kiczula recommends a deliberate approach: get a free estimate of benefit first, then take it to your CPA for review. “I’m not saying to get a cost segregation study done and then take it to your tax professional,” he says. “I’m saying get an estimate done and then see how the benefits might apply to your specific situation.” This approach allows your CPA to evaluate actual numbers and consider whether the depreciation will help based on your income type and ability to use the losses.
If your CPA still pushes back, Kiczula advises evaluating the reason. If the CPA genuinely determines the study is not a fit—for example, if you plan to sell the property soon and face depreciation recapture—he often agrees. CostSegRx offers complimentary estimates of benefit with no obligation, giving investors concrete numbers to discuss with their tax professional.
For investors, the key takeaway is that cost segregation is no longer reserved for large commercial properties. An engineering-based study can unlock years of accelerated depreciation, but it requires proactive engagement with your CPA.
