How Much Does a Cost Segregation Study Cost in 2025?

One of the most common questions property owners ask before pursuing a cost segregation study is: "How much is this going to cost me?" It's a fair question—understanding the investment required helps you evaluate whether the potential tax savings justify the expense.

Cost Segregation Study Pricing: The Quick Answer

The cost of a cost segregation study varies widely based on property type, size, and the method used:

Let's break down what drives these costs and how to determine the right option for your situation.

Factors That Affect Cost Segregation Study Pricing

1. Property Size and Value

The larger and more valuable your property, the more detailed the study needs to be—and the higher the cost:

• Under $500,000: $500 - $3,000
• $500,000 - $2 million: $2,000 - $7,000
• $2 million - $10 million: $5,000 - $15,000
• $10 million+: $10,000 - $25,000+

Pro tip: Higher-value properties typically generate proportionally higher tax savings, so the study cost as a percentage of savings actually decreases for larger properties.

2. Property Type and Complexity

Different property types have varying levels of complexity:

Lower Cost (Simpler Studies):

• Single-family rentals
• Small apartment buildings
• Standard office buildings
• Retail strip centers

Higher Cost (Complex Studies):

• Hospitals and medical facilities
• Manufacturing plants
• Hotels and resorts
• Mixed-use developments
• Custom or unique buildings

3. Study Methodology

The level of detail and methodology significantly impacts pricing:

Engineering-Based Studies ($5,000 - $25,000+)

• Physical site visit by engineers
• Detailed component-by-component analysis
• Comprehensive documentation for IRS defense
• Best for large properties, audits, or complex structures

Desktop Studies ($2,000 - $6,000)

• Uses construction data and modeling
• No physical site visit required
• Based on blueprints, photos, and cost data
• Appropriate for straightforward properties

Software/Algorithm-Based Studies ($500 - $2,000)

• Uses industry cost databases and algorithms
• Quick turnaround (often same-day)
• Ideal for residential and smaller commercial
• Growing in accuracy and acceptance

4. Geographic Location

Market rates vary by region:

• Major metro areas: 10-20% higher fees
• Rural areas: Often lower fees but fewer providers
• High cost-of-living states: Premium pricing

5. New Construction vs. Existing Property

• New construction: Often lower costs due to available documentation (blueprints, invoices, contractor records)
• Existing/older properties: May require more research and estimation, increasing costs

The True Cost: What's Included in the Price

A quality cost segregation study should include:

Standard Deliverables

Detailed Asset Classification Report

• Component-by-component breakdown
• Depreciation life for each asset category
• Cost allocation methodology

Depreciation Schedules

• Current and future year depreciation amounts
• Comparison to straight-line depreciation
• Bonus depreciation calculations

Supporting Documentation

• Engineering rationale
• Methodology description
• IRS compliance documentation

Tax Integration Package

• Form 4562 data
• Information for your CPA
• Filing guidance

What to Watch Out For

Red flags in pricing:

• Unusually low quotes (may indicate inadequate methodology)
• Percentage-based fees exceeding 10-15% of savings
• Hidden fees for documentation or revisions
• No guarantee of IRS defensibility

Cost Segregation Study Cost vs. Potential Savings

The key question isn't "How much does it cost?" but "What's my return on investment?"

Example ROI Calculations

Example 1: Single-Family Rental ($400,000 property)

• Study cost: $1,000
• First-year additional depreciation: $35,000
• Tax savings (32% bracket): $11,200
• ROI: 11x the study cost

Example 2: Small Apartment Building ($1.5 million property)

• Study cost: $4,500
• First-year additional depreciation: $180,000
• Tax savings (37% bracket): $66,600
• ROI: 15x the study cost

Example 3: Commercial Office ($5 million property)

• Study cost: $8,000
• First-year additional depreciation: $650,000
• Tax savings (37% bracket): $240,500
• ROI: 30x the study cost

The General Rule of Thumb

If your property is worth $200,000 or more (excluding land), a cost segregation study almost always pays for itself many times over.

For most properties, the ROI ranges from 5x to 30x the study cost, making it one of the highest-return investments available to property owners.

Ways to Reduce Cost Segregation Study Costs

1. Bundle Multiple Properties

Many providers offer discounts for studying multiple properties:

• 2-3 properties: 10-15% discount
• 4-10 properties: 15-25% discount
• 10+ properties: Negotiate custom pricing

2. Choose the Right Study Level

Don't overpay for complexity you don't need:

• Simple residential property? Desktop or software study is likely sufficient
• $10 million commercial building? Full engineering study is worth the investment

3. Timing Considerations

• Year-end rush: Prices may increase October-December
• Off-peak seasons: Better availability and potential discounts January-April

4. Provide Good Documentation

Having organized records reduces the work required:

• Purchase documents and HUD statement
• Property photos (interior and exterior)
• Blueprints or floor plans
• Prior improvement records
• Recent appraisals

5. Use Modern Software Solutions

Technology has democratized cost segregation. Platforms like ROOM42 provide:

• Instant estimates at no cost
• IRS-compliant studies at a fraction of traditional pricing
• Same methodology, lower overhead

Questions to Ask Before Hiring

Before committing to a cost segregation provider, ask:

"What methodology do you use?"

• Engineering-based? Desktop? Software?
• Is it IRS-compliant?

"What's included in the price?"

• Documentation for CPA?
• Depreciation schedules?
• Revision policy?

"What are your qualifications?"

• Years of experience?
• Number of studies completed?
• Engineering or CPA credentials?

"Do you guarantee your work?"

• Audit support included?
• What happens if IRS challenges the study?

"What's your timeline?"

• Turnaround time?
• Can you meet my tax filing deadline?

Is a Free Estimate Worth It?

Many providers (including ROOM42) offer free initial estimates. These are valuable because:

• No risk assessment: See potential savings before committing
• Compare providers: Get estimates from multiple sources
• Tax planning: Understand impact on your overall tax strategy
• Property screening: Identify which properties are best candidates

Use free estimates to make informed decisions, then invest in a full study for properties with significant savings potential.

The Bottom Line: Is the Cost Worth It?

For the vast majority of rental and commercial property owners, yes—a cost segregation study is absolutely worth the cost.

Consider this:

• Study cost: Often 1-5% of potential first-year tax savings
• Risk: Very low (well-established IRS methodology)
• Payback period: Usually immediate (same tax year)

The math almost always works in your favor, especially with:

• Properties worth $200,000+
• High-income owners (25%+ tax bracket)
• Properties acquired in the last 15 years
• New construction or major renovations

When It Might Not Be Worth It

Cost segregation may not make sense if:

• Property value is under $150,000
• You're in a very low tax bracket
• You plan to sell within 12 months
• You have significant suspended passive losses you can't use

In these cases, the tax savings may not justify even a low-cost study.

---

Get Your Free Cost Segregation Estimate

Stop wondering about pricing—see your actual potential savings in minutes. Our platform provides instant cost segregation estimates with transparent, upfront pricing. No hidden fees, no sales pressure.

Calculate Your Savings Now →

Add your property details and discover how much you could save. Most property owners are surprised by the results—and the ROI is almost always compelling.