What’s Needed for a Cost Segregation Proposal

By Nick Coppola — Tax Logic™ CRE

Table of Contents

When it comes to maximizing after-tax ROI, a cost segregation proposal is your first step. This is the IRS-approved process that identifies which parts of your building can be depreciated faster — turning depreciation into cash flow.

But before any cost segregation firm can run the numbers, they’ll need some basic details about your property. Here’s exactly what’s required — and why it matters.

🧱 1. Property Information

Every cost segregation proposal starts with the fundamentals:

Property name or address
Type of property (hotel, medical office, senior living, multifamily, retail, etc.)
Square footage
Year built or placed in service
Date purchased or construction completed

These details help engineers determine how your property fits into IRS depreciation categories — for example, whether it qualifies as a 39-year commercial building or a 27.5-year residential property.

💵 2. Financial Details

Next, the team needs to understand your investment numbers:

Total purchase price (for acquisitions)
Land value allocation (from appraisal or tax card)
Construction or renovation cost (for new builds or remodels)
Major improvements since purchase

This allows the analysts to reclassify assets into shorter tax lives — typically 5, 7, or 15 years instead of 39 — unlocking accelerated depreciation and front-loaded tax deductions.

🧾 3. Ownership and Entity Information

A cost segregation study is tax-driven, so the proposal must align with your entity structure. You’ll provide:

Entity or taxpayer name (LLC, LP, S-Corp, etc.)
Tax year-end (calendar or fiscal)
CPA or tax preparer contact information

This ensures your cost segregation report integrates seamlessly into your return and Form 4562 elections.

🏗️ 4. Supporting Documents (Optional but Powerful)

While not always required for the proposal, these documents can make your estimate far more precise:

Depreciation schedule (if the property is already depreciating)
Appraisal or closing statement (HUD-1)
Blueprints, site plans, or AIA contractor cost breakdowns
Photos of the property (interior and exterior)

Think of these as “X-rays” that allow the engineers to see how the building was put together — and where the hidden value lies.

⚡ 5. Special Project Notes

If your property includes any of the following, make sure to mention it:

Energy-efficient upgrades (for potential §179D deductions)
Reusable non-load-bearing walls (Green Zip Technology™)
Tenant improvements or partial build-outs
Recent demolitions or dispositions

These details can open up additional layers of tax savings beyond the standard cost segregation study.

📊 6. What You’ll Receive

Once you provide this information, the proposal you receive will typically include:

Accelerated depreciation breakdown (5-, 7-, 15-year assets)
Estimated first-year tax savings
ROI comparison (standard vs. accelerated depreciation)
Fee quote and project timeline (usually 4–6 weeks for the full engineering report)

🔑 The Takeaway

A cost segregation proposal isn’t complicated — it’s about providing clarity. With just a few documents, you’ll uncover how much tax you’re overpaying and how quickly you can recover it.

At Tax Logic™ CRE, we help developers, investors, and brokers layer cost segregation into every deal — creating what we call “Patriotic Capital Recycling™” by turning IRS rules into growth capital.

Ready to see your building’s hidden value?
👉 Request a Cost Segregation Proposal