Cost segregation is a tax strategy that allows real estate investors to accelerate depreciation on certain building components, generating significant tax savings in the early years of ownership. Yet many investors have never heard of it from their tax preparer. Some were told it wasn't worth it for their property, while others had CPAs who simply never brought it up. The result is years of straight-line depreciation on assets that could have been generating tax savings from day one.
Brian Kiczula, principal at CostSegRx, sees this pattern consistently. He attributes the gap to two main factors: the historical cost of studies and a knowledge gap among CPAs.
"The main reason cost segregation was not on the table for smaller investors historically comes down to cost," Kiczula explains. Studies on smaller properties used to run into thousands of dollars, sometimes tens of thousands. For a CPA managing clients with modest residential portfolios, recommending a study that cost more than the benefit it produced was not good advice. The default became straight-line depreciation, and that default stuck.
What has changed is that engineering-based studies can now be conducted cost-effectively on smaller residential properties. Kiczula emphasizes that these are not AI-generated reports or online calculators, but actual detailed engineering studies. "I'm not talking about a DIY cost seg study or an online calculation. I'm talking about an engineered study where someone is looking at the property and providing an accurate study back."
Beyond cost, Kiczula points to a knowledge gap among tax preparers. Some are simply not deeply familiar with real estate investment strategies, or their real estate clients represent a small enough portion of their book that cost segregation never became a specialty. "They're not investor-friendly CPAs, or they're not well versed in real estate," he says. That does not make them bad CPAs, but it means the investor may need to bring the topic to the table 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. I'm saying get an estimate done and then see how the benefits might apply to your specific situation." This removes friction from the conversation and respects that whether the depreciation actually helps depends on the investor's tax picture—specifically, whether they are generating active or passive income and can use the losses.
If a CPA looks at the numbers and genuinely concludes it is not a fit, Kiczula often agrees. He has archived proposals where the study would not serve the client well, such as when the investor plans to sell soon and face depreciation recapture, or when they simply cannot use the losses. "I don't mind canceling proposals," he says. But if the objection is based on unfamiliarity rather than genuine analysis, getting an independent estimate puts real numbers on the table.
CostSegRx offers complimentary estimates of benefit with no obligation to move forward, helping investors and their CPAs evaluate whether cost segregation makes sense for their situation.
