When your family has a rental home, a duplex, or a small commercial building, the IRS requires you to write off that building slowly over time. The normal rate of depreciation for residential rental properties is 27.5 years. Commercial buildings take 39 years. A cost segregation study is an engineer-based study that takes a property apart into its parts, and determines how many of those parts have shorter useful lives than the entire building. , and landscaping falls into 5, 7 or 15-year categories instead. The building itself remains on the slower schedule. All other parts move onto the quicker schedules.
The IRS even publishes an Audit Techniques Guide for cost segregation, most recently updated in February 2025, which tells its own examiners what a properly prepared study should look like.
How Does Cost Segregation Help Property Owners?
By moving items into the shorter categories, property owners receive earlier deductions from their first few years of owning the property. Early-year deductions are especially important today. The One Big Beautiful Bill Act, signed into law on July 4, 2025, made 100 percent bonus depreciation permanent for qualifying property acquired and placed in service after January 19, 2025.
Bonus depreciation applies to items that have a recovery life of twenty years or less, so the building itself never qualifies. The shorter-life components a study identifies often do.
One caveat. Creating a deduction and being able to use it are two different things. Passive activity rules, at-risk limits, your tax bracket, and your state ‘s treatment of bonus depreciation all affect the outcome, and depreciation you claim now can be recaptured when you sell. Talk to your own tax professional before you count on anything.
What To Look For In A Cost Segregation Provider
Begin with who physically performs the work. A quality study is prepared by engineers who inspect or document the property, not by someone applying a rule of thumb to a purchase price. The IRS guide is explicit that rule-of-thumb allocations are a red flag.
Next, ask about what services are included within your fee. Some providers charge separate fees for site visits and/or audit support in addition to their fee for preparing a study. Next ask them to provide an estimated time frame for delivery of your study since receiving your study after the due date for filing your taxes is no good to you. Lastly, ensure that they will deliver your certified public accountants with a complete, well-documented study since only then can the value of the study be realized by your CPA.
R.E. Cost Seg: Best For Investors Who Want A Specialist Rather Than A Generalist
Cost segregation is the only thing R.E. Cost Seg does, and that focus shows in how the service is packaged. Smaller residential owners can use the Rapid Report, which starts at $950, covers properties of up to four units with a depreciable basis under $1.2 million, and arrives in around five to ten business days. Bigger or more complex properties get the Fully Engineered Study, from $2,320 residential and $2,730 commercial, in roughly 15 to 20 business days. Both include audit support, and a free proposal is quoted within 24 hours.
CSSI: Best For A Long Track Record And A No-Cost Preliminary Analysis
CSSI began conducting engineering-based cost segregation studies in 2003 and states they have completed over 65,000 studies to date. This places CSSI among the largest dedicated providers in the nation. They provide services nationwide on all property types, from individual rental units to large commercial multi-unit portfolios with a cost basis of at least $200,000. Their fee covers both the on-site inspection and audit defense at no extra charge, which reduces the potential for the owner to incur additional fees. In addition to providing cost segregation services, CSSI can assist its clients in obtaining the Section 179D energy deduction and R&D tax credit incentives, if eligible.
KBKG: Best For Smaller Properties On A Tight Budget
KBKG has been a specialty tax consulting firm since 1999, and while they do offer fully engineered studies, the most intriguing product for typical landlord investors is software. KBKG introduced CostSegregation.com in November 2025. This software allows users to quickly complete a self-guided study and obtain a pre-populated, IRS-compliant report in a fraction of the time a traditional engineered study takes. The initial price for this service begins at $495.00 per report. Users may generate a report for either residential or commercial property regardless of ownership type and/or investment type. The maximum depreciable value is $1.5 million. Audit support is included.
Madison SPECS: Best For Thorough On-Site Documentation
Madison SPECS is a is part of Madison Commercial Real Estate Services and provides services to property owners nationwide. The unique selling point of Madison SPECS is that they refuse to be forced into either choosing the tax approach or engineering approach to each individual project; they choose to run both approaches simultaneously for each and every study. Their in-house engineers visit clients’ properties to take measurements, photographs, and document client assets instead of relying solely upon paperwork, and their cost analysis uses existing construction cost information like RSMeans. Once the client has completed their report, Madison SPECS works with your cpa to ensure you receive the supporting documentation. A complimentary feasibility analysis begins this process.
Duffy+Duffy Cost Segregation Services: Best For Commercial And Multifamily Buildings
Founded in 2002, Duffy+Duffy was the first cost segregation company in Ohio. Today, Duffy+Duffy operates throughout the United States from offices located in Ohio and Michigan. Its team pairs CPAs with construction engineers/estimators who work together to provide each client with studies based upon IRS guidelines/case law and do so without cutting corners. The firm specializes in commercial/multi family real estate investments which include but are not limited to industrial, medical, and retail properties. Duffy+Duffy has extensive experience providing cost segregation services to owners of LEED-certified construction projects. Additionally, Duffy+Duffy is an approved continuing education provider for CPAs in Ohio, Michigan, and Pennsylvania.
Which Is The Best Cost Segregation Provider For You?
Each of the five companies reviewed above can create a defensible study. Where each differs is “fit”. If you want the cheapest entry point for a single small rental, KBKG ‘s software is hard to beat. If you own a large commercial asset, Duffy+Duffy and Madison SPECS both bring serious engineering depth.
For most investors, though, R.E. Cost Seg is the best cost segregation specialist in the US. It does one thing: it prices transparently for both small residential owners and larger commercial ones, and it tells you what the study will cost and what it should return before you spend a dollar. That combination of focus and clarity is why it takes the top spot., sidewalk
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