Cost segregation studies, which allow property owners to accelerate depreciation on certain assets, have long been marketed toward institutional investors acquiring $100 million buildings. But according to Brian Kiczula, a Real Estate Professional at CostSegRx, this leaves a vast segment of investors—those purchasing properties between $1 million and $15 million—either overpaying for studies sized for larger deals or skipping them altogether, forfeiting valuable tax benefits.
The process of cost segregation breaks down a property into its individual cost components, enabling short-life assets such as exterior site improvements, interior fixtures, and specialized equipment to be depreciated over 5 or 15 years instead of the standard 27.5 or 39 years. With bonus depreciation currently at 100%, investors can pull forward all short-life asset depreciation into year one, offsetting active or passive income depending on their tax situation.
Kiczula explains that traditional cost segregation firms have structured their workflows and fee schedules around large transactions, never adjusting them downward for smaller deals. "Historically, cost-segregation studies were very expensive, and most cost-segregation firms in the United States cater towards larger investors—your clients that are buying the $100 million building," he says. "I saw that there was a real need for clients that were investing in residential real estate, your Airbnb clients, your investors that are buying small hotels for $5 million."
The core issue isn't that smaller properties lack depreciable assets; it's that the high fees can erase the return on investment for properties at lower purchase prices. When a traditional firm analyzes a $4 million Airbnb or a $6 million mobile home community, it often applies pricing designed for much larger engagements. "The companies that are out there are still charging the same premium prices for a much scaled-down study," Kiczula says.
This pricing dynamic directly influences how CPAs advise their clients. When the cost of a study exceeds the tax savings it produces, advisors reasonably tell investors not to bother. Over time, this advice becomes conventional wisdom: cost segregation doesn't work for smaller investors. Kiczula argues this belief is often misplaced. "I've had a lot of tax preparers tell their clients that it doesn't make sense for them to do a cost segregation study because they only own a certain amount of properties with a basis or a purchase price at a certain level," he says. "Individuals can get studies that are affordable to make the return on investment beneficial for them."
Investors and their advisors often assume a $750,000 short-term rental or a small RV park won't have enough short-life assets to justify the cost. Kiczula says the opposite is frequently true. Properties with resort-style pools, pickleball courts, and extensive exterior site improvements carry substantial accelerated depreciation—even single residential properties used as short-term rentals. RV parks consistently surprise clients with how much qualifies, and car washes and gas stations are similarly asset-rich. The common thread is significant exterior improvements and specialized equipment that qualify as 5-year or 15-year property rather than depreciating over the building's full life.
Kiczula notes that appearance can mislead in both directions. A 60,000-square-foot commercial building might contain little beyond basic warehouse space—cheap vinyl flooring, fluorescent lighting—yielding far less accelerated depreciation than its square footage suggests.
CostSegRx was built to serve investors in the up-to-$15 million range directly. The firm provides upfront estimates of benefit so clients can evaluate the return before committing to a full study. "We want to make sure there's a solid return on investment for our clients," Kiczula says. Every prospective client receives an estimated benefit analysis first, which they review with their CPA or tax preparer before deciding whether to proceed.
Kiczula also distinguishes the firm's engineering-based methodology from rule-of-thumb approaches—online calculators or percentage-based estimates that generate reports in minutes without examining a property's individual assets. Those approaches, he says, fail to account for the actual condition and age of components like parking lots or HVAC systems, and would not hold up under audit. "The rule of thumb percentages just don't take into consideration the attributes of the assets that you acquired," Kiczula says.
For investors in this segment, the decision hinges on whether the study's cost leaves enough room for the tax savings to matter. Kiczula's argument is that it can—provided the firm performing the work prices the engagement to match the property's actual scope rather than defaulting to institutional rates.
