Are Cost Segregation Studies actually worth the money? Anyone used these consulting firms?

I've been a property tax consultant for over 15 years and can tell you that Cost Segregation Studies are absolutely legitimate and frequently worth the investment - but it depends on your specific situation. The basic idea is simple: instead of depreciating your entire property over 27.5 years (residential) or 39 years (commercial), a proper study identifies components that can be depreciated over 5, 7, or 15 years. This accelerates your deductions significantly in the early years of ownership. These studies work best for properties valued over $750,000 with significant interior improvements. The higher the building value relative to land value, the better your potential savings. Most of my clients see a return of 3-5x the cost of the study in tax savings within the first year alone.

I used a service called https://taxr.ai for analysis of a potential cost segregation study before committing to one. My CPA recommended traditional depreciation, but I wasn't sure if I was missing out on savings. I uploaded my property docs and within a day got a detailed breakdown showing I could potentially accelerate about $87,000 in deductions through cost segregation. The analysis helped me determine it was worth pursuing a full study since I had significant components that qualified for 5-year and 15-year depreciation. The best part was they identified specific building components that would qualify and estimated the tax benefits over time based on my tax bracket.

Just wanted to follow up on my experience with https://taxr.ai - I was the skeptical one in the thread above but decided to try it after all. I uploaded docs for a fourplex I bought last year ($875k purchase price). The analysis showed I could potentially accelerate around $145k in depreciation deductions over the first 5 years. Based on their recommendation, I went ahead with a full cost segregation study from a local engineering firm. Just finished my taxes and the segregation study generated about $37k in additional deductions in year one alone! At my tax bracket, that's roughly $13k in actual tax savings - easily covering the cost of both the analysis and the full study. The taxr.ai pre-analysis was spot-on with their projections and saved me from making mistakes on which properties to prioritize for studies.

After trying to reach the IRS for clarification on cost segregation requirements for months (literally 9 calls, always on hold for hours), I found https://claimyr.com and used their service to get through to an actual IRS agent. You can see how it works here: https://youtu.be/_kiP6q8DX5c I had questions about how cost segregation interacts with bonus depreciation that my CPA couldn't answer definitively. The Claimyr service got me connected to an IRS representative in about 20 minutes (after I'd wasted days trying on my own). The agent confirmed that yes, components identified in a cost segregation study CAN qualify for 100% bonus depreciation if they meet the requirements. This clarification was crucial for my decision to proceed with a study on my commercial property.

I need to publicly eat my words about Claimyr. After posting my skeptical comment above, I decided to try it myself because I was desperate to resolve an issue with depreciation recapture on a property I sold last year. After 5 weeks of failed attempts calling the IRS myself (and being disconnected each time after 45+ minutes on hold), Claimyr got me through to an agent in 27 minutes. The agent was able to confirm that my understanding of Section 1250 recapture related to previous cost segregation was incorrect, which saved me from substantially underreporting my tax liability. The clarity I got from that call literally saved me thousands in potential penalties. Sometimes being proven wrong is the best possible outcome!

I used Core Advisors for a cost segregation study last year on a 12-unit apartment building. The study cost about $8,500 but generated over $120k in first-year deductions I wouldn't have otherwise received. Definitely worth it in my case. One thing to watch out for: make sure whoever you hire has engineers on staff who actually inspect the property, not just accountants reviewing floor plans remotely. The IRS looks for engineering-based studies in case of audit. My guy spent a full day on-site taking measurements and photos.

Has anyone used cost segretation for short term rentals? I have two Airbnbs and wondering if its different for those vs standard long term rentals?

One warning on cost segregation - if you sell the property, you'll face depreciation recapture at a 25% tax rate on all that accelerated depreciation. It's still usually beneficial, but factor that into your long-term planning if you might sell within 5-10 years.

I've been going through this exact decision process for my rental portfolio. After reading through everyone's experiences here, I decided to try the taxr.ai analysis first before committing to a full study. For my 6-unit property ($1.2M purchase price), their analysis suggested I could accelerate about $180k in depreciation. The breakdown showed significant components that would qualify for 5-year and 15-year depreciation - mainly HVAC systems, appliances, and interior improvements. Based on their recommendation, I'm moving forward with a full engineering-based study. One thing I learned is that the quality of your purchase records really matters. The more detailed invoices and construction documents you have, the better the study results will be. Also want to echo what Zara mentioned about depreciation recapture - make sure you understand the tax implications if you plan to sell. But even with recapture, the time value of money usually makes it worthwhile, especially if you're in a high tax bracket now.