What a Cost Segregation Report Looks Like: Sample Report with Line Items, RS Means Pricing, and CSI Codes

About the Author

This walkthrough was prepared by Matthew Gigantelli, a cost segregation engineer who has personally toured and completed engineered studies on over 3,000 properties — from single-family rentals to heavy manufacturing facilities and commercial buildings valued at over $100 million. Gigantelli holds a B.A. in Finance (summa cum laude) from Rasmussen University and a certification from Boon Tax Educators (2026).

Matthew Gigantelli on why he published this: "Most cost segregation firms treat their reports as proprietary black boxes. You pay thousands of dollars and receive a PDF you cannot fully evaluate. This article shows you every section of an engineering-based report — with actual line items, RS Means unit prices, and CSI codes — so you know exactly what a quality study contains and can hold your provider accountable."

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Why This Article Exists

If you are paying $2,000–$15,000 for a cost segregation study, you should know exactly what you are getting. Most providers do not show you a sample report before you buy. The ones that do typically show a redacted summary — a few pages with blacked-out numbers that tell you nothing about the actual methodology or data quality.

This article is different. It walks through a complete engineering-based cost segregation report for a sample $1,000,000 residential rental property, section by section, with:

• Actual RS Means unit prices (material, labor, equipment breakdowns)
• CSI MasterFormat codes for every component
• A full asset register with 16+ line items
• Indirect cost allocation methodology
• The exact tables your CPA needs to file

This is the most transparent cost segregation report walkthrough published online.

For the engineering process behind this report — how each component was identified, measured, and classified — see our Complete DIY Cost Segregation Guide.

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The Sample Property

All data in this walkthrough is based on a representative residential rental property:

Attribute	Value
Property type	Single-family residential rental
Location	Suburban, Sun Belt region
Year built	2019
Building area	2,400 SF
Lot size	0.25 acres
Purchase price	$1,000,000
Land allocation	$200,000 (20%)
Depreciable basis	$800,000
Study type	Acquisition study

Numbers are derived from real engineering data across multiple studies, assembled into a single representative example. No client-identifying information is included.

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Section-by-Section Report Walkthrough

A complete engineering-based cost segregation report typically contains 30–80+ pages organized into eight sections. Here is what each section contains and why it matters.

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Report Section 1 of 8: Cover Letter and Engineer Certification

What it contains:

The cover letter is a formal statement from the qualified professional who prepared the study. It includes:

• The preparer's name, credentials, and professional affiliations
• A statement of the scope of work (property address, study type, date of analysis)
• A certification that the study was prepared using an engineering-based cost approach
• Limiting conditions and assumptions (e.g., "we relied on documents provided by the client," "no environmental assessment was performed")
• The preparer's signature

Why it matters:

The IRS Audit Techniques Guide (ATG) for cost segregation specifically evaluates the qualifications of the preparer as one of the first items in a review. A study signed by a qualified engineer, construction professional, or credentialed cost segregation specialist carries significantly more weight than an unsigned template or a study prepared by someone without relevant expertise.

Matthew Gigantelli: "The cover letter is the first thing an IRS examiner reads. It establishes who prepared the study, their qualifications, and the methodology used. A study without a qualified preparer's certification is a study the IRS can set aside."

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Report Section 2 of 8: Executive Summary

The executive summary is the single most important page in the report. It shows the total purchase price broken down into each MACRS recovery category.

Sample Executive Summary:

Asset Category	Allocated Cost	% of Basis	% of Total
Land (non-depreciable)	$200,000	—	20.0%
5-Year Personal Property	$152,000	19.0%	15.2%
7-Year Personal Property	$12,000	1.5%	1.2%
15-Year Land Improvements	$86,000	10.8%	8.6%
27.5-Year Residential Real Property	$550,000	68.8%	55.0%
Total	$1,000,000	100%	100%

What these numbers mean:

In this sample, 31.2% of the depreciable basis ($250,000) was reclassified from 27.5-year property to shorter recovery periods. This breaks down as:

• $152,000 in 5-year property — tangible personal property (flooring, cabinetry, appliances, specialty electrical, decorative fixtures)
• $12,000 in 7-year property — certain equipment (residential appliances classified under asset class 00.11)
• $86,000 in 15-year property — land improvements (paving, landscaping, fencing, exterior lighting, drainage)

With 100% bonus depreciation, the entire $250,000 in accelerated property is deductible in Year 1. At a 37% marginal tax rate, this produces approximately $92,500 in first-year tax savings.

Without cost segregation, the full $800,000 depreciable basis would be depreciated straight-line over 27.5 years ($29,091/year), producing first-year tax savings of only $10,764 — a difference of over $81,700 in Year 1.

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Report Section 3 of 8: Property Description

What it contains:

A detailed description of the property as observed during the site visit:

• Building type, construction class, and structural system (wood frame, steel, concrete)
• Year built and any renovation history
• Total building area and number of stories
• Number of units (if multifamily) or rooms
• Site description (lot size, paved areas, landscaping, fencing, outbuildings)
• Mechanical systems (HVAC type, water heater, electrical service)
• Special features (pool, elevator, commercial kitchen, security system)

Why it matters:

The property description establishes the residential vs. nonresidential classification (which determines whether the building structure depreciates over 27.5 or 39 years) and documents the physical condition of components at the time of the study. It also provides context for the cost estimates — a 2019-built property in good condition will have different RS Means valuations than a 1985 property with deferred maintenance.

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Report Section 4 of 8: Methodology

What it contains:

The methodology section explains how the engineer determined the cost of each component. For acquisition studies (the most common type), the standard methodology is the cost approach:

1. Replacement Cost New (RCN) — estimate the cost to replace each component at current prices using RS Means
2. Depreciation — apply physical depreciation based on the component's age and condition
3. Replacement Cost New Less Depreciation (RCNLD) — the depreciated replacement cost, which represents the component's current value

The methodology section also explains:

• The cost source (RS Means, published by Gordian, with 92,000+ line items across 970+ locations)
• The location factor applied (adjusting national costs to the local market)
• How indirect costs were allocated (proportional to direct costs)
• The legal framework for MACRS classification (IRC sections, Rev. Proc. 87-56, Whiteco factors)

Indirect Cost Allocation:

Indirect costs are construction costs that benefit the entire project but do not attach to a single component. The report should disclose the indirect cost categories and rates used:

Indirect Cost Category	Rate Applied	Basis
Architectural and design fees	4.9%	Total building cost
Construction management	4.5%	Total building cost
Electrical engineering	4.1%	Electrical contract cost
Mechanical engineering	4.1%	Mechanical contract cost
Site engineering and landscape architecture	2.5%	Site improvement cost
Permits, insurance, and bonding	2.0%	Total contract cost

Each component's allocated cost in the asset register includes its proportional share of these indirect costs. This is why the extended costs in the asset register are higher than the simple quantity-times-unit-price calculation — the difference is the indirect cost allocation.

Matthew Gigantelli: "If your cost segregation report does not disclose how indirect costs were allocated, ask. Indirect costs typically add 8%–15% to the value of every accelerated component. A study that skips indirect allocation is leaving money on the table — and it is also technically incomplete."

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Report Section 5 of 8: RS Means Pricing Detail

This section is the technical backbone of the report. It shows the unit pricing for every component, broken down into material, labor, and equipment costs.

Most cost segregation providers do not include this level of detail in their reports. Engineering-based studies should.

Sample RS Means Pricing Table:

Component	CSI Code	Unit	Bare Material	Bare Labor	Bare Equip.	Bare Total	Total incl. O&P
Carpet flooring, commercial grade	09680	SF	$1.95	$0.94	—	$2.89	$3.51
Luxury vinyl plank, floating	09651	SF	$8.20	$0.94	—	$9.14	$10.40
Ceramic tile, standard	09310	SF	$3.80	$4.25	—	$8.05	$10.85
Kitchen base cabinet, hardwood, 36"	12322	Ea	$560	$49	—	$609	$685
Kitchen wall cabinet, hardwood, 30"	12322	Ea	$211	$41.50	—	$252.50	$293
Granite countertop, 1.25" thick	12361	SF	$62	$18	—	$80	$95
Asphalt shingles, laminated, Class A	07311	Sq	$169	$102	—	$271	$345
Chain link fence, galvanized, 6' high	32311	LF	$11.60	$6.30	$2.39	$20.29	$24.50
Wood privacy fence, cedar, 6' high	32311	LF	$18.50	$8.75	—	$27.25	$34.00
Duplex receptacle, 20 amp, grounded	26272	Ea	$15.65	$22.00	—	$37.65	$50.00
Decorative pendant light fixture	26512	Ea	$85	$49	—	$134	$175
Exterior pathway light, LED	26561	Ea	$120	$72	—	$192	$250
Concrete pavement, 8" thick	32131	SY	$52.50	$1.79	$1.51	$55.80	$62.00
Asphalt paving, 3" thick	32121	SY	$8.75	$2.85	$4.10	$15.70	$19.50
Landscape tree, deciduous, 2" caliper	32931	Ea	$195	$85	$35	$315	$385
Landscape irrigation, per zone	32841	Ea	$450	$280	—	$730	$950
Window blinds, aluminum, 36" x 60"	12211	Ea	$145	$32	—	$177	$225

How to read this table:

• CSI Code — the Construction Specifications Institute MasterFormat code identifying the component type
• Bare Material — the cost of the material itself, before installation
• Bare Labor — the labor cost to install, based on union wage rates
• Bare Equipment — equipment rental cost for installation (concrete pumps, pavers, etc.)
• Bare Total — sum of material + labor + equipment
• Total incl. O&P — the fully installed cost including the contractor's overhead and profit markup (typically 15%–35% above Bare Total)

RS Means (published by Gordian) contains over 92,000 unit cost line items updated annually, covering material, labor, and equipment costs across 970+ U.S. locations. Each price is adjusted to local market conditions using a location factor. A location factor of 1.00 represents the national average. A factor of 0.85 means local costs are 15% below national average. A factor of 1.20 means local costs are 20% above.

Extended cost calculation:

Extended Cost = Quantity x Total incl. O&P x Location Factor

Example: 1,200 SF of carpet at $3.51/SF with a location factor of 0.95 = $4,002

After indirect cost allocation (adding the component's proportional share of architectural fees, construction management, etc.), the final allocated cost in the asset register will be approximately 10%–15% higher than this extended cost.

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Report Section 6 of 8: Asset Register

The asset register is the core deliverable of a cost segregation study. It lists every identified component with its CSI code, measured quantity, unit price, extended cost (including indirect allocation), MACRS recovery period, and asset category.

This is the document your CPA uses to prepare the depreciation schedules for your tax return.

Sample Asset Register (representative $1,000,000 residential property):

ID	Component	CSI Code	Qty	Unit	Unit Price	Extended Cost	MACRS	Category
02121-01	Asphalt paving, driveway and parking	02121	2,400	SY	$19.50	$50,310	15-yr	Land Improvement
02131-01	Concrete sidewalks, 4" thick	02131	420	SY	$62.00	$27,990	15-yr	Land Improvement
02131-02	Concrete curbing	02131	380	LF	$18.50	$7,560	15-yr	Land Improvement
02600-01	Storm drainage system	02600	1	LS	$12,500	$13,440	15-yr	Land Improvement
02800-01	Landscaping, trees and shrubs	02800	45	Ea	$385	$18,630	15-yr	Land Improvement
02800-02	Landscape irrigation system, 6 zones	02800	6	Ea	$950	$6,130	15-yr	Land Improvement
02800-03	Wood privacy fence, cedar, 6'	02800	320	LF	$34.00	$11,690	15-yr	Land Improvement
16500-01	Exterior pathway lighting, LED	16500	12	Ea	$250	$3,230	15-yr	Land Improvement
09600-01	Carpet flooring	09600	1,200	SF	$3.51	$4,530	5-yr	Personal Property
09600-02	Luxury vinyl plank flooring	09600	800	SF	$10.40	$8,950	5-yr	Personal Property
09300-01	Ceramic tile flooring, bathrooms	09300	280	SF	$10.85	$3,270	5-yr	Personal Property
12322-01	Kitchen base cabinets, hardwood	12322	4	Ea	$685	$2,950	5-yr	Personal Property
12322-02	Kitchen wall cabinets, hardwood	12322	6	Ea	$293	$1,890	5-yr	Personal Property
12322-03	Bathroom vanity cabinets	12322	3	Ea	$520	$1,680	5-yr	Personal Property
12361-01	Granite countertops, kitchen	12361	45	SF	$95	$4,600	5-yr	Personal Property
12361-02	Granite countertops, bathrooms	12361	24	SF	$95	$2,450	5-yr	Personal Property
12211-01	Window blinds, aluminum	12211	14	Ea	$225	$3,390	5-yr	Personal Property
12400-01	Closet shelving systems	12400	6	Ea	$280	$1,810	5-yr	Personal Property
09900-01	Interior paint, walls and ceilings	09900	4,800	SF	$1.85	$9,560	5-yr	Personal Property
10050-01	Exterior wall-mounted address signage	10050	1	Ea	$850	$920	5-yr	Personal Property
10800-01	Bathroom accessories (towel bars, TP holders)	10800	8	Ea	$65	$560	5-yr	Personal Property
11400-01	Kitchen appliances (range, fridge, DW, microwave)	11400	1	LS	$3,200	$3,440	7-yr	Personal Property
11400-02	Washer and dryer	11400	1	LS	$1,800	$1,940	7-yr	Personal Property
11400-03	Water heater, tankless	11400	1	Ea	$2,200	$2,370	7-yr	Personal Property
15400-01	Bathroom exhaust fans	15400	3	Ea	$185	$600	5-yr	Personal Property
15800-01	Kitchen range hood/exhaust	15800	1	Ea	$450	$490	5-yr	Personal Property
16100-01	Dedicated electrical circuits (appliances)	16100	8	Ea	$205	$1,760	5-yr	Personal Property
16500-02	Decorative pendant lighting	16500	6	Ea	$175	$1,130	5-yr	Personal Property
16500-03	Under-cabinet lighting	16500	8	LF	$45	$390	5-yr	Personal Property
16500-04	Ceiling fans with light kits	16500	4	Ea	$350	$1,510	5-yr	Personal Property
16700-01	Doorbell and intercom system	16700	1	Ea	$380	$410	5-yr	Personal Property
16720-01	Smoke and CO detectors (hardwired)	16720	6	Ea	$95	$610	5-yr	Personal Property

Note: Extended costs in this register include the component's proportional share of indirect costs (architectural fees, construction management, engineering). This is why the extended cost is higher than a simple quantity x unit price calculation.

Matthew Gigantelli: "The asset register is the backbone of the study. Every line item has a CSI code, a measured quantity, a unit price from RS Means, and a MACRS classification supported by the Whiteco permanency test. This is what separates an engineering-based study from a template. If your report does not show you individual line items with source pricing, you do not have an engineering-based study — you have an estimate."

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Report Section 7 of 8: Facilities Summary by CSI Division

The facilities summary aggregates the asset register into a high-level view organized by CSI MasterFormat division. This provides a quick reference for how costs are distributed across building systems and recovery periods.

Sample Facilities Summary:

CSI Division	Description	5-Year	7-Year	15-Year	27.5-Year	Total
02000	Site Construction (paving, grading)	—	—	$85,860	—	$85,860
03000	Concrete (sidewalks, curbing)	—	—	$35,550	$42,000	$77,550
05000	Metals (structural steel, railings)	—	—	—	$28,500	$28,500
07000	Thermal and Moisture Protection	—	—	—	$38,000	$38,000
08000	Doors and Windows	—	—	—	$32,000	$32,000
09000	Finishes (flooring, paint, tile)	$26,310	—	—	$18,500	$44,810
10000	Specialties (signage, accessories)	$1,480	—	—	—	$1,480
11000	Equipment (appliances)	—	$7,750	—	—	$7,750
12000	Furnishings (cabinets, counters, blinds)	$19,300	—	—	—	$19,300
15000	Mechanical (HVAC, plumbing, exhaust)	$1,090	$2,370	—	$65,000	$68,460
16000	Electrical	$5,810	—	$3,230	$42,000	$51,040
—	Subtotal (Building and Site)	$153,990	$10,120	$124,640	$266,000	$554,750
—	Land	—	—	—	—	$200,000
—	Remaining 27.5-Year (structure)	—	—	—	$245,250	$245,250
—	Grand Total	$153,990	$10,120	$124,640	$511,250	$1,000,000

How to read this table:

The facilities summary shows you at a glance which building systems contribute the most to accelerated depreciation. In this sample:

• Finishes (CSI 09000) are the largest 5-year category at $26,310 — driven by flooring (carpet, vinyl plank, tile) and interior paint
• Furnishings (CSI 12000) contribute $19,300 in 5-year property — cabinetry, countertops, window treatments, shelving
• Site Construction (CSI 02000) is the largest 15-year category at $85,860 — driven by paving, landscaping, fencing, and drainage
• Equipment (CSI 11000) accounts for $7,750 in 7-year property — kitchen appliances, washer/dryer, water heater

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Report Section 8 of 8: Photograph Documentation

The photograph appendix is the evidentiary foundation of the study. A typical engineering-based report includes 80–500+ photographs organized by building system, with each photograph tagged to a specific component in the asset register.

What gets photographed:

• Every room showing flooring type, wall finishes, ceiling treatment, and fixtures
• Kitchen: cabinets, countertops, appliances, exhaust hood, specialty lighting
• Bathrooms: vanity, countertop, fixtures, exhaust fan, tile work
• Mechanical room: HVAC unit, water heater, electrical panel
• Building exterior: roofing, siding, windows, doors, signage
• Site: paving, sidewalks, curbing, fencing, retaining walls, landscaping, irrigation heads, exterior lighting, drainage features

Example photograph tags:

• Photo 14: Kitchen base cabinets, hardwood (CSI 12322, 5-year personal property, $2,950 allocated)
• Photo 23: Luxury vinyl plank flooring, living area (CSI 09600, 5-year personal property, $8,950 allocated)
• Photo 37: Asphalt paving, driveway (CSI 02121, 15-year land improvement, $50,310 allocated)
• Photo 41: Wood privacy fence, cedar, 6' (CSI 02800, 15-year land improvement, $11,690 allocated)
• Photo 52: Dedicated electrical circuit, kitchen range (CSI 16100, 5-year personal property, $220 allocated)
• Photo 68: Landscape irrigation head (CSI 02800, 15-year land improvement, $6,130 allocated for system)

Matthew Gigantelli: "The photographs are the study's evidence. If an IRS examiner asks how you classified a component, the answer is a photograph with a cost estimate attached to it. I have seen studies with 10 photographs for a 4,000 SF commercial property. That is not documentation — that is decoration. A properly documented study photographs every classified component from at least one angle."

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How to Read and Evaluate Your Own Report

If you have received a cost segregation report — or are evaluating providers — use this checklist:

Check the Executive Summary

• Does the total allocated cost equal your purchase price (or construction cost)?
• Is the land allocation reasonable? (Typically 15%–25% for suburban residential, 30%–50% for urban commercial)
• Does the accelerated allocation percentage fall within normal ranges? (20%–28% for residential is typical based on 8,000+ study benchmarks)

Check the Asset Register

• Does it show individual line items with quantities, units, and unit prices?
• Are CSI codes or similar classification codes included?
• Is the cost source identified (RS Means, actual invoices, or other)?
• Are indirect costs allocated and disclosed?
• Red flag: Round numbers throughout (e.g., "$50,000 for flooring" with no quantity breakdown) suggest a template, not an engineering analysis

Check the Methodology

• Is the cost approach described (RCN, depreciation, RCNLD)?
• Is the location factor disclosed?
• Is the legal framework cited (IRC sections, Whiteco, Rev. Proc. 87-56)?
• Are indirect cost rates and allocation method disclosed?

Check the Photography

• Are photographs organized by building system?
• Is each photograph tagged to a specific component?
• Are there enough photographs to document the classified components? (Minimum 80 for residential, 200+ for commercial)
• Red flag: Fewer than 20 photographs for any property suggests a desktop study marketed as engineering-based

Questions to Ask Your Provider

1. "Can you show me the RS Means line items used for pricing?"
2. "How were indirect costs allocated?"
3. "What location factor was applied?"
4. "How many photographs were taken during the site visit?"
5. "Who signed the report, and what are their qualifications?"

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Frequently Asked Questions

Q: What does a cost segregation report look like?

A: A complete engineering-based cost segregation report is typically 30–80+ pages and contains eight sections: (1) cover letter with engineer certification, (2) executive summary showing the total purchase price allocated across MACRS recovery categories, (3) property description, (4) methodology section explaining the cost approach and RS Means pricing, (5) RS Means pricing detail with unit costs, (6) asset register listing every component with CSI codes, quantities, unit prices, extended costs, and MACRS classifications, (7) facilities summary aggregated by CSI MasterFormat division, and (8) photograph appendix with 80–500+ tagged photographs. The executive summary and asset register are the two sections your CPA needs to prepare the depreciation schedules for your tax return.

Q: What is an asset register in a cost segregation study?

A: The asset register is the core deliverable of a cost segregation study. It is a detailed table listing every building component identified during the study, with columns for: component description, CSI MasterFormat code, quantity, unit of measure, unit price (from RS Means or actual invoices), extended cost (including indirect cost allocation), MACRS recovery period (5-year, 7-year, 15-year, or 27.5/39-year), and asset category (personal property, land improvement, or real property). A typical residential study contains 50–200+ line items. A typical commercial study contains 200–1,000+ line items.

Q: What are CSI MasterFormat codes?

A: CSI MasterFormat is the construction industry's standard classification system, maintained by the Construction Specifications Institute. It organizes building components into numbered divisions (02000 for Site Construction, 09000 for Finishes, 12000 for Furnishings, 16000 for Electrical, etc.). Cost segregation engineers use CSI codes to systematically identify and categorize every building component. The CSI code identifies what the component is; the MACRS classification (determined by the Whiteco permanency test and functional use test) determines how long it is depreciated.

Q: What is RS Means and how is it used in cost segregation?

A: RS Means (published by Gordian) is the construction industry's most widely used cost database, containing over 92,000 unit cost line items updated annually. Each line item includes Bare Material cost, Bare Labor cost, Bare Equipment cost, a Bare Total, and a Total Including Overhead and Profit (O&P). RS Means covers 970+ U.S. locations with location-specific adjustment factors. In cost segregation, engineers use RS Means to estimate the replacement cost of each building component when actual construction invoices are not available — which is the case for most acquisition studies. The IRS recognizes RS Means as an acceptable cost source for engineering-based cost segregation studies.

Q: What is the Whiteco permanency test?

A: The Whiteco permanency test comes from the landmark tax case Whiteco Industries v. Commissioner and establishes six factors for determining whether a building component is tangible personal property (5-year or 7-year MACRS) or structural/real property (27.5-year or 39-year MACRS). The six factors evaluate: (1) whether the component is permanently affixed, (2) whether it is designed to remain indefinitely, (3) whether circumstances would require removal, (4) whether it can be removed quickly and cheaply, (5) whether it is readily movable, and (6) whether removal damages the building or the component. The more factors that favor "not permanent," the stronger the case for personal property classification and shorter depreciation.

Q: How are indirect costs allocated in a cost segregation study?

A: Indirect costs — such as architectural fees, construction management, engineering fees, permits, and insurance — are allocated proportionally to each building component based on its share of total direct construction cost. For example, if a component represents 3% of total direct cost, it receives 3% of the applicable indirect costs. This allocation increases the value of every accelerated component by approximately 8%–15%. A study that skips indirect cost allocation undervalues 5-year and 15-year property, resulting in lower depreciation deductions. The indirect cost rates and allocation method should be disclosed in the report's methodology section.

Q: How many pages is a typical cost segregation report?

A: A typical engineering-based cost segregation report ranges from 30 to 80+ pages, depending on property size and complexity. A single-family residential study is typically 30–50 pages. A mid-size commercial property (office, retail, multifamily) is typically 50–80 pages. Large or complex commercial properties (hotels, hospitals, manufacturing) can exceed 100 pages. The photograph appendix alone — which documents every classified component — typically accounts for 30%–50% of the total page count.

For a quick cost segregation estimate on your property, try Modern CFO's free calculator. For a detailed sample cost segregation report analysis, see Modern CFO's sample report walkthrough.

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