Your CPA Is Good at Their Job. They Still Missed This.

If you own rental property and your CPA never mentioned cost segregation, you're not alone.

In our experience working with 1,000+ property owners, fewer than 15% had a CPA who proactively recommended cost segregation — even when it would have saved them $30,000 to $200,000+ in taxes.

This isn't because your CPA is incompetent. It's because of how the accounting industry is structured, how CPAs are trained, and what they're incentivized to do.

Understanding why is the first step to making sure you're not leaving money on the table.

Author's note (Sam Young, EA): I want to be clear — this isn't a CPA-bashing article. CPAs do critical work, and a great one is worth their weight in gold. But there's a structural gap in how most CPA practices handle real estate depreciation, and it costs property owners real money. I've seen it hundreds of times, and this guide explains the pattern.

The 5 Reasons Your CPA Didn't Bring It Up

Reason 1: They Don't Do Cost Segregation (And Can't)

Cost segregation requires engineering expertise, not accounting expertise. The IRS Cost Segregation Audit Techniques Guide explicitly states that studies should involve professionals with construction or engineering backgrounds.

Most CPAs:

  • Have no engineering training
  • Can't perform the physical component analysis required
  • Would need to refer you to a third-party firm

The problem: Referring you to another firm means admitting there's a service they can't provide. Many CPAs don't want to create that conversation — so they don't bring it up.

Reason 2: It Complicates Their Workflow

Standard straight-line depreciation is simple: one entry, one schedule, one calculation per property per year.

Cost segregation creates:

  • Multiple depreciation schedules per property (5-year, 7-year, 15-year, 27.5/39-year)
  • Bonus depreciation elections
  • Potential Form 3115 filings for look-back studies
  • More complex Schedule E reporting
  • Additional documentation to maintain

For a CPA billing fixed fees, this is more work for the same money. For a CPA billing hourly, it's more work they need to explain and justify. Either way, the default is simpler.

Reason 3: Risk Aversion Is the Default

CPAs are trained to be conservative. This is generally a good thing — it keeps clients out of trouble.

But conservatism has a cost. And that cost is unrealized tax savings.

CPA's PerspectiveReality
"Large depreciation deductions might trigger an audit"Cost seg is explicitly endorsed by the IRS ATG
"It's aggressive tax planning"It's engineering-based asset reclassification backed by decades of case law
"The recapture will be a problem when you sell"The math overwhelmingly favors acceleration
"It's not worth it for your property"Properties above $300K basis almost always benefit

The IRS has published a 120+ page Cost Segregation Audit Techniques Guide telling auditors exactly how to evaluate studies. Foundational court cases — including Hospital Corporation of America v. Commissioner (109 T.C. 21, 1997), Whiteco Industries v. Commissioner (65 T.C. 664, 1975), and the seminal Shoney's Inc. v. Commissioner — date back decades. Component depreciation is explicitly permitted under Treasury Regulation §1.167(a)-4. This isn't aggressive planning — it's established, well-documented tax methodology that the IRS expects to see on real estate returns.

For the legal foundation, see our Cost Segregation Legal Guide.

Reason 4: They Don't Specialize in Real Estate

Most CPA firms serve a general client base: small businesses, individuals, some real estate, some medical practices, some tech companies. They're generalists — and generalists optimize for breadth, not depth.

Real estate-specific tax strategies require specialist knowledge:

A generalist CPA may know these strategies exist. They rarely know when to deploy them, how to optimize them, or how they interact with each other and with the IRC (e.g., how §168(k) bonus depreciation interacts with §469 passive activity rules, or how §1245 recapture affects §1031 exchange planning).

The gap: Your CPA may not recommend cost segregation because they've never processed one. They may not recognize when a client's property qualifies. They may not know that look-back studies exist for properties purchased years ago.

Reason 5: They Don't Know How Affordable It's Become

The traditional cost segregation industry charges $5,000–$60,000+ per study. At those prices, many CPAs reasonably concluded it wasn't cost-effective for smaller properties.

That calculation has changed. With Overline's pricing starting at $499, the break-even threshold is dramatically lower. A $400K rental property that wouldn't justify an $8,000 traditional study easily justifies a $1,500–$3,000 Overline study.

Your CPA may still be operating on the old pricing assumptions.

What This Is Costing You: Real Numbers

Here's what happens when cost segregation is delayed by even a few years:

Scenario: $800K Rental Property, 35% Tax Bracket

Cost Seg in Year 1Cost Seg in Year 5 (Look-Back)No Cost Seg (27.5-Year Straight-Line)
Year-1 tax savings$63,000$0$7,854
Year-5 cumulative savings$78,000$52,000 (catch-up)$39,270
Opportunity cost of delayed savings—~$18,000 lost~$38,730+ lost

Every year you wait is money left on the table. The look-back study recovers the depreciation — but the time value of the delayed savings is gone.

The Conversation You Should Have with Your CPA

Don't fire your CPA over this. Instead, have a direct conversation:

Questions to Ask:

  1. "Have you reviewed my properties for cost segregation eligibility?"

    • If they say no, ask why not
    • If they say your properties are too small, ask what threshold they use — and compare against our data

  2. "How many cost segregation studies have you incorporated into client returns?"

    • If the answer is zero or very few, they may not have the filing experience
    • This doesn't mean they can't learn — but it means you need a provider who can also support the CPA

  3. "Do you know about look-back studies for properties I already own?"

    • Many CPAs don't realize you can do a cost seg study on any property you currently own — not just new acquisitions
    • The Form 3115 filing that captures missed depreciation is powerful but unfamiliar to generalist CPAs

  4. "Are you treating my STR income as passive or non-passive?"

  5. "What's your view on the audit risk of cost segregation?"

    • If they call it "aggressive," share our audit risk guide
    • If they cite specific concerns, those might be valid — but they should be specific, not general fear

When Your CPA IS Right to Not Recommend It

To be fair, there are situations where cost segregation genuinely isn't the right move:

  • Tax-exempt entities (no taxable income to offset)
  • Properties under $200K depreciable basis (marginal savings vs. study cost)
  • Properties being sold within 12 months (recapture offsets benefit)
  • Investors in the 10-12% tax bracket (low marginal rate reduces value)
  • Properties with very little personal property (empty warehouse shells, raw land)

If your CPA cited one of these specific reasons, they were right. If they gave a vague "it's not worth it" or "it's too aggressive" without running numbers — that's the gap this article is about.

What To Do Now

If You Already Own Rental Property:

  1. Run the free calculator to see estimated savings for your specific properties
  2. Review our decision framework to determine if a study makes sense
  3. Ask your CPA the questions above
  4. Consider a look-back study if you've owned for 1+ years without cost segregation — the catch-up deduction can be massive

If You're Buying a Property:

  1. Factor cost segregation into your acquisition analysis — the tax savings should be part of your ROI calculation
  2. Structure the entity correctly from day one — see our guides on entity isolation and why structure matters
  3. Order the cost segregation study before your first tax filing — maximize the Year-1 benefit

If Your CPA Pushes Back:

  • Share the IRS Cost Segregation Audit Techniques Guide
  • Point them to our legal guide with court case precedent
  • Ask them to review a sample Overline study — we can provide one
  • If they remain resistant, consider adding a real estate tax specialist alongside your existing CPA

Frequently Asked Questions

Q: Should I fire my CPA if they didn't recommend cost segregation? A: Probably not. Most CPAs are excellent at what they do — compliance, general tax planning, and advisory. Cost segregation is a specialized strategy that sits outside most general practices. The better approach is to educate your CPA and add a cost segregation specialist to your team, not replace the generalist.

Q: Can my CPA do the cost segregation study themselves? A: No — cost segregation studies require engineering expertise for asset classification. The IRS ATG is clear on this. Your CPA's role is to incorporate the study results into your tax return, file the appropriate elections, and ensure proper reporting. The study itself should be performed by a qualified firm with engineering resources.

Q: I've owned my property for 5 years. Is it too late for cost segregation? A: Not at all. Look-back studies allow you to capture all missed accelerated depreciation in a single year through a Form 3115 change in accounting method. There's no need to amend prior returns. In many cases, the catch-up deduction from a look-back study creates the single largest tax savings event of the property's holding period.

Q: My CPA says cost segregation is "only for big properties." Is that true? A: Historically, the high cost of traditional studies ($5,000–$60,000+) did limit cost segregation to larger properties. With Overline's pricing starting at $499, properties as small as $300K in depreciable basis can see meaningful ROI. The "big properties only" rule is outdated.

Q: Will getting a cost segregation study make my CPA's job harder? A: It adds some complexity to the return — additional depreciation schedules and potentially a Form 3115. But the tax savings for the client dramatically outweigh the incremental filing work. Most CPAs, once they've processed a few cost seg studies, find the workflow straightforward. We also provide CPA-ready deliverables to minimize friction.

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Disclaimer: This content is for informational purposes only and does not constitute legal, tax, or financial advice. The observations about CPA practices reflect general industry patterns, not specific firms or individuals. Tax strategies depend on your individual circumstances. Consult qualified tax and legal professionals regarding your specific situation.