Self Performed Cost Segregation Study

[Michael Archard]

I have been thinking about self-performing a cost segregation study to tap into accelerated depreciation on one of my smaller rental properties. I have seen companies offering the service for a few thousand dollars. Has anyone done one themselves? I know the IRS guidelines require a competent person with an engineering or appraising background. I am a civil engineer PE with a background in real estate, construction, finance and estimating.

[Michael Plaks]

@Michael Archard

Your background probably qualifies you. My suggestion is to review sample reports that cost seg companies offer to their prospects and decide whether you feel comfortable replicating their approach and their typical numbers. You can also pay $500 for one of those algorithm-based studies to gauge their numbers.

After that, the question will come down to your risk tolerance. Cost segregation audits are relatively rare. If you are audited and hire me to defend you, I'd be comfortable defending your cost seg, given your qualifications. Alternatively, you can order a cost seg study at that time. I would expect it to not be too far from yours if you're diligent.

Last thing: with you being a PE on what I assume to be a high W2 salary, make sure that cost seg will actually save you money on taxes. It may or may not be the case, depending on your tax situation.