A significant number of real estate investors who could benefit from cost segregation have never heard about it from their tax preparer, according to Brian Kiczula, principal of CostSegRx. Some were told it was not worth it for their property, while others had CPAs who simply did not bring it up. For many, the result is years of straight-line depreciation on assets that could have been generating tax savings from day one.
Kiczula sees this pattern consistently, and his explanation for it is straightforward: cost segregation studies used to be too expensive for smaller properties. Studies on smaller properties used to run into thousands of dollars, sometimes tens of thousands. For a CPA managing clients with modest residential portfolios, the math simply did not work. Recommending a study that cost more than the benefit it produced was not good advice. So the default became straight-line depreciation across the entire asset, and that default stuck. Many CPAs who work with real estate investors never updated their thinking because their client base never pushed them to.
What has changed is that engineering-based studies can now be conducted cost-effectively on smaller residential properties. Not AI-generated reports, not online calculators, but actual detailed engineering studies. Kiczula is clear about this distinction: “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. Some tax preparers 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, or maybe their clients own real estate but don’t own enough of it for that to be an option they’re offering,” he says. That does not make them bad CPAs. It does mean the investor may need to bring the topic to the table themselves.
Kiczula’s recommended approach is deliberate. Do not get a cost segregation study done first and then hand it to your tax preparer as a done deal. Get a free estimate of benefit, take it to your CPA, and let them review it against your specific tax situation before committing to anything. “I’m not saying to get a cost segregation study done and then take it to your tax professional,” he says. “I’m saying get an estimate done and then see how the benefits might apply to your specific situation.” This approach does two things: it removes friction from the conversation because your CPA is evaluating actual numbers rather than a general pitch, and it respects the fact that whether the depreciation actually helps you depends entirely on your tax picture, specifically whether you’re generating active or passive income and whether you can use the losses in the way you’re expecting.
Kiczula takes a measured stance on pushback. If a CPA looks at the numbers and genuinely concludes it is not a fit for the client, he will often agree with them. He has archived proposals in cases where he concluded the study would not serve the client well, including situations where the investor was planning to sell the property soon and would face depreciation recapture, or where the investor simply could not use the losses the study would generate. “I don’t mind canceling proposals,” he says. “I don’t want to, but it’s part of the business.” If your CPA’s objection is based on unfamiliarity with cost segregation rather than a genuine analysis of your situation, that is worth a second conversation. Getting an independent estimate puts real numbers on the table and gives both of you something concrete to evaluate.
CostSegRx offers complimentary estimates of benefit with no obligation to move forward.
