Cost Segregation Pricing: What a Study Costs, What Affects the Price, and How to Evaluate the ROI
A cost segregation study typically costs $3,000 to $15,000 depending on property type and complexity. Here is what drives the pricing and how to calculate whether it is worth it.
What a Cost Segregation Study Typically Costs
Residential rentals (single-family, condos, small multifamily): $3,000 to $5,000. Short-term rentals and vacation properties: $3,500 to $6,000. Multifamily apartment complexes: $5,000 to $10,000. Commercial properties (office, retail, warehouse): $5,000 to $12,000. Specialty properties (hotels, restaurants, medical offices): $8,000 to $15,000+.
At AE Tax Advisors, our cost segregation studies are priced at $1 per square foot, providing a simple, transparent calculation tied to property size.
What Drives the Price Differences
Property complexity: Mixed-use buildings with multiple components cost more. Study methodology: Detailed engineering with site visits costs more than desktop studies. Firm qualifications: Licensed PEs and tax professionals command higher fees. Volume: Commissioning studies on 5-10 properties simultaneously reduces per-property cost.
How to Calculate the ROI
Consider a $1,000,000 residential rental (excluding land). Without a study: ~$36,364 annual depreciation over 27.5 years. With a study reclassifying 30% into shorter-lived categories: ~$300,000 moves to bonus-eligible classes. At 100% bonus depreciation, first-year depreciation jumps to ~$320,000.
At a 35% marginal rate, first-year tax savings from acceleration is approximately $101,200. Against a $4,000 study fee, the return is 25:1. Even at a 24% rate, savings are ~$69,400 -- over 17:1 return.
When a Cost Segregation Study Is Not Worth It
Property basis too small: Under $150,000 depreciable basis, the savings may be marginal. Loss will be suspended: Without REPS, the STR exception, or passive income, the timing benefit evaporates. Plan to sell within 1-2 years: Section 1245 recapture at full marginal rates can turn a benefit into a net cost. Very low tax bracket: At 12%-22% rates, the dollar value of accelerated deductions is lower.
What to Look for in a Provider
Engineering credentials: Licensed PE or certified cost estimator. Tax expertise: Understanding of bonus depreciation, Section 1245/1250 recapture, passive activity rules. Audit defense support: The firm should stand behind its work at no additional cost. IRS compliance: Following the IRS Cost Segregation Audit Techniques Guide. Transparent pricing: Flat-fee or per-square-foot pricing, not a percentage of identified savings.
Key Takeaways
- Cost segregation studies range from $3,000 to $15,000 depending on property type and complexity.
- ROI is typically 10:1 to 25:1 for properties with $300K+ depreciable basis in the 32%-37% bracket.
- Not worth it if losses will be suspended, basis is very small, or you plan to sell within 1-2 years.
- Look for firms with engineering credentials, tax expertise, audit defense, and transparent pricing.
- At AE Tax Advisors, studies are $1 per square foot with full audit defense included.
Frequently Asked Questions
How much does a cost segregation study cost?
Most studies cost $3,000 to $15,000 depending on property type, size, and complexity. Residential rentals and STRs are typically $3,000-$6,000. At AE Tax Advisors, our studies are priced at $1 per square foot.
Is a cost segregation study worth it for a $500,000 property?
In most cases, yes. A $500,000 property with $400,000 depreciable basis and 30% reclassification moves $120,000 into bonus-eligible categories. At 35%, first-year savings is ~$42,000 against a $3,000-$4,000 fee -- over 10:1 ROI.
Can I get a study on a property I bought years ago?
Yes. A lookback study with Form 3115 lets you claim all cumulative missed depreciation as a catch-up deduction in a single year without amending prior returns.
How long does a study take?
Most studies complete in two to four weeks from engagement. Desktop studies using existing floor plans can be faster.
Do I need a site visit?
The IRS does not require one, but the detailed engineering approach with physical inspection produces the most defensible results. Desktop studies are often sufficient for standard residential properties.
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