Cost segregation studies have long been associated with multimillion-dollar commercial properties, but a growing segment of real estate investors is being left out of the equation. Brian Kiczula, a Real Estate Professional at CostSegRx, argues that the industry's pricing structure has historically catered to institutional investors acquiring $100 million buildings, leaving those in the $1 million to $15 million range—such as Airbnb owners, small hotel buyers, and RV park operators—either overpaying for studies sized for larger deals or forgoing them entirely.
The core of cost segregation is breaking down a property into its individual cost components, allowing short-life assets like exterior site improvements, interior fixtures, and specialized equipment to be depreciated over 5 or 15 years instead of the standard 27.5 or 39 years. With bonus depreciation currently at 100%, investors can accelerate all short-life asset depreciation into the first year, offsetting active or passive income depending on their tax situation. However, the firms performing these studies have designed their workflows and fee structures around large transactions and never adjusted them downward, according to Kiczula.
“Historically, cost-segregation studies were very expensive, and most cost-segregation firms in the United States cater towards larger investors – your clients that are buying the $100 million building,” Kiczula said. “I saw that there was a real need for clients that were investing in residential real estate, your Airbnb clients, your investors that are buying small hotels for $5 million.” The issue is not that smaller properties lack depreciable assets; rather, study fees remain high enough to erase the return on investment for properties at lower purchase prices.
This pricing disconnect has significant consequences. When a traditional firm analyzes a $4 million Airbnb or a $6 million mobile home community, it often applies pricing designed for far larger engagements. “The companies that are out there are still charging the same premium prices for a much scaled-down study,” Kiczula said. This dynamic shapes how CPAs advise their clients: when the study costs more than the tax savings it produces, advisors reasonably tell investors not to bother. Over time, that advice hardens into conventional wisdom that cost segregation doesn’t work for smaller investors—a belief Kiczula says is often wrong.
“I’ve had a lot of tax preparers tell their clients that it doesn’t make sense for them to do a cost segregation study because they only own a certain amount of properties with a basis or a purchase price at a certain level,” Kiczula said. “Individuals can get studies that are affordable to make the return on investment beneficial for them.”
Investors and their advisors often assume that a $750,000 short-term rental or a small RV park won’t have enough short-life assets to justify the cost. Kiczula says the opposite is frequently true. Properties with resort-style pools, pickleball courts, and extensive exterior site improvements carry substantial accelerated depreciation—even single residential properties used as short-term rentals. RV parks consistently surprise clients with how much qualifies, and car washes and gas stations are similarly asset-rich. The common thread is significant exterior improvements and specialized equipment that qualify as 5-year or 15-year property rather than depreciating over the building’s full life.
CostSegRx was built to serve this underserved segment directly, providing upfront estimates of benefit so clients can evaluate the return before committing to a full study. “We want to make sure there’s a solid return on investment for our clients,” Kiczula said. The firm’s engineering-based methodology differs from rule-of-thumb approaches—online calculators or percentage-based estimates that generate reports in minutes without examining a property’s individual assets. Those approaches fail to account for the actual condition and age of components like parking lots or HVAC systems and would not hold up under audit. “The rule of thumb percentages just don’t take into consideration the attributes of the assets that you acquired,” Kiczula said.
For investors in this segment, the decision hinges on whether the study’s cost leaves enough room for the tax savings to matter. Kiczula’s argument is that it can—provided the firm performing the work prices the engagement to match the property’s actual scope rather than defaulting to institutional rates. To learn more about CostSegRx and its services, visit costsegrx.com.
