A Tax Logic™ Guide for CRE Developers, Investors, and CPAs

When it comes to cost segregation, not all firms are created equal.
A high-quality study can unlock hundreds of thousands of dollars in accelerated depreciation and tax savings — but a poor one can trigger IRS scrutiny, audit exposure, and lost opportunity.

Before you hire a provider, here’s what to evaluate.

🧾 1. Engineering Depth and IRS Compliance

The IRS expects cost segregation studies to be engineering-based.
That means qualified professionals — not just accountants — must physically analyze your property’s components and reclassify assets according to the IRS Audit Technique Guide (ATG).

✅ Look for:

• PE-stamped reports or certified engineers.
• Photos, cost sources, and detailed component listings.
• References to IRS ATG and MACRS classification.

🚫 Avoid:

• Firms that only reclassify assets via spreadsheets or “rule-of-thumb” allocations.

Tax Logic™ Insight:
Ask: “If this study were audited tomorrow, could I hand it to an IRS engineer with confidence?”

🧮 2. Tax Integration and Strategic Alignment

A cost segregation study isn’t a standalone product — it’s a tool within your overall tax strategy.

✅ Look for:

• Integration with bonus depreciation, Section 179, and 179D energy incentives.
• A CPA-ready report that includes Form 4562 data.
• Support for entity-level planning, including PropCo/OpCo structures.

🚫 Avoid:

• Firms that only deliver the report, without explaining the impact on your tax return.

Tax Logic™ Insight:
The study should be the beginning of your after-tax ROI conversation, not the end.

🧱 3. Experience by Property Type

Every property class is different — and so are its tax levers.
A firm specializing in retail may miss opportunities in hotels, healthcare, or senior living.

✅ Look for:

• Documented experience with your asset class.
• Familiarity with construction cost databases (RSMeans, Marshall & Swift).
• Understanding of emerging materials like reusable Green Zip™ non-load-bearing walls.

🚫 Avoid:

• Firms that rely on generic templates for every project.

Tax Logic™ Insight:
Specialized assets demand specialized expertise.

📈 4. Financial Modeling and ROI Transparency

Before committing, request a sample deliverable showing projected tax savings and cash-flow impact.

✅ Look for:

• A clear before-and-after comparison.
• Transparent assumptions (tax rate, hold period, bonus percentage).
• ROI metrics (e.g., “$100,000 in accelerated depreciation saves $35,000 in Year 1 taxes”).

🚫 Avoid:

• Vague estimates or “we’ll know after the study” responses.

Tax Logic™ Insight:
Numbers sell deals — and protect them.

🧰 5. Audit Support and Documentation

IRS exams don’t usually question the math — they question the methodology.

✅ Look for:

• Written audit defense or support guarantee.
• Professional liability insurance.
• Secure electronic retention of all files for at least seven years.

🚫 Avoid:

• Firms that disclaim audit responsibility.

Tax Logic™ Insight:
You’re not just buying a report; you’re buying credibility.

💼 6. Fee Structure and Value Alignment

Not all pricing models are compliant or client-friendly.

✅ Look for:

• Flat or tiered fees based on complexity, not savings.
• Clear scope of work and no hidden CPA coordination charges.

🚫 Avoid:

• Contingency or “percentage of savings” pricing — the IRS has flagged this as a potential conflict of interest.

Tax Logic™ Insight:
A cost segregation study is an investment in capital acceleration — not a commodity.

🧩 7. Integration with Broader Tax Incentives

Top-tier firms don’t stop at depreciation. They stack incentives.

✅ Look for:

• Coordination with 179D, 45L, and R&D tax credits.
• Recognition of energy efficiency and reusability elements.
• Familiarity with multi-entity ownership and partnership allocations.

🚫 Avoid:

• Firms that only talk about cost seg in isolation.

Tax Logic™ Insight:
Stack the proof. Layer every IRS-backed incentive that fits your building.

✅ Comparison Grid: Quick Checklist

Category	What “Good” Looks Like	Red Flags
Engineering	PE-stamped, IRS-compliant	Spreadsheet reclass
Tax Integration	CPA collaboration, Form 4562 ready	No tax coordination
Asset Expertise	Industry-specific knowledge	Generic template
Financial Modeling	Clear ROI projections	Vague numbers
Audit Defense	Free support, insured	No follow-through
Fees	Transparent flat fee	% of savings pricing
Tax Stacking	Integrates 179D, 45L, R&D	Single-incentive focus

🚀 Final Thought

Choosing a cost segregation firm is not about finding the cheapest provider — it’s about choosing a partner who understands how the IRS views your building, your entity structure, and your exit strategy.

At Tax Logic™, we integrate engineering, accounting, and investment logic into a single overlay — helping you turn IRS rules into growth capital.