With the July 2025 One Big Beautiful Bill Act (OBBBA) restoring 100% bonus depreciation permanently, real estate investors are moving quickly to capture maximum deductions. But the IRS is watching closely.

A poorly executed cost segregation study can raise red flags, trigger an audit, or even cause you to lose valuable deductions. If you plan to leverage cost segregation this year, following IRS-approved methods is critical.

Here’s how to ensure your study passes IRS scrutiny and protects your cash flow.

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1. Work With a Qualified Professional

This is non-negotiable. A proper cost segregation study should be conducted by a specialist with both engineering and tax expertise. The provider should follow the IRS Cost Segregation Audit Techniques Guide (ATG) and understand the latest depreciation rules under OBBBA.

Avoid:

• Cheap, one-size-fits-all studies
• DIY templates
• Providers with no documented IRS-compliance track record
  

These shortcuts often fail to meet IRS standards and could jeopardize your deductions.

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2. Maintain Complete Documentation

If the IRS audits your return, documentation is your defense. A compliant study should include:

• A full property description
• A detailed cost breakdown for each component
• The methodology used for valuation
• Photos, site plans, and architectural drawings
  

Well-documented studies not only protect you during an audit — they also give your CPA everything needed to apply the deductions correctly.

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3. Avoid Inflated Allocations

Some providers overstate the value of short-life assets to make the savings look bigger. While this may be tempting, the IRS can challenge unrealistic allocations, and you could lose the entire deduction.

It’s always better to claim accurate, defensible deductions than to risk penalties or clawbacks later.

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4. Follow the Timing Rules

Under OBBBA, 100% bonus depreciation applies only to assets placed in service in the qualifying tax year. If you acquire a property but it’s not placed in service until later, you may only qualify for 40%.

A qualified provider will ensure your study reflects the correct timing so you don’t miss out on the full benefit.

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5. Coordinate With Your CPA

Your cost segregation study isn’t just a report — it’s part of your overall tax strategy. Your CPA will need to:

• Integrate the results into your tax return
  
• File Form 3115 if applying a cost segregation to a property placed in service in a prior tax year
  
• Ensure deductions are correctly applied under current IRS rules
  
  

When your CPA and cost segregation provider are aligned, you maximize your savings and minimize your risk.

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Protect Your Deductions, Protect Your Cash Flow

Cost segregation and bonus depreciation can dramatically lower your tax bill. But if done incorrectly, they can create just as many problems as they solve.

Our team delivers IRS-compliant, engineering-based cost segregation studies backed by detailed documentation. We will:

• Schedule a professional, on-site (or plan-based) study
  
• Ensure 100% compliance with the IRS ATG
  
• Coordinate directly with your CPA
  
• Help you claim every deduction you’re entitled to — without raising red flags
  

Let’s make sure your next tax strategy is both profitable and bulletproof. Contact us today to get started.