Frequently Asked Questions

A cost segregation study is an engineering-based analysis that identifies and reclassifies components of a building from long-life real property (27.5 or 39 years) into shorter-life personal property (5, 7, or 15 years) for tax depreciation purposes. This accelerates your depreciation deductions, reducing your taxable income and improving cash flow in the early years of property ownership.

Any owner of residential rental property can benefit from a cost segregation study. Short-term rental investors (Airbnb, VRBO, vacation rentals) and long-term rental investors (traditional buy-and-hold) both qualify. The study is especially valuable for high-income investors, real estate professionals, and anyone looking to offset rental or active income with accelerated depreciation.

Stratum offers flat-fee pricing starting at $3,500 for a single property study, with portfolio discounts available for investors with three or more properties. The fee is tax-deductible as a business expense, and the tax savings from the study typically exceed the cost by 5x to 20x.

Our standard turnaround time is 14 business days from the date we receive all required documents. Portfolio clients receive priority delivery with 10-day turnaround, and enterprise clients can request expedited 7-day delivery.

No. Cost segregation can be applied to properties purchased or placed in service at any time. If you have owned a property for years and never had a cost segregation study, you can file IRS Form 3115 (Change in Accounting Method) to claim all prior-year missed depreciation in a single tax year, without amending previous returns.

Bonus depreciation allows investors to deduct a significant percentage of the cost of 5, 7, and 15-year property in the first year the asset is placed in service, rather than spreading the deduction over the full recovery period. Bonus depreciation rates have been phasing down in recent years, making it important to conduct your study as soon as possible.

No. Stratum uses a desktop analysis methodology that relies on property photographs, closing statements, appraisals, and public property records. This approach is accepted by the IRS and allows us to serve property investors in all 50 states without requiring an on-site visit.

You will need to provide your closing statement (HUD-1 or closing disclosure), property photographs (interior and exterior), and any renovation invoices if applicable. Listing photos from the purchase are typically sufficient. We also need basic property details like the address, purchase price, and date placed in service.

No. A cost segregation study does not increase your audit risk. In fact, a properly conducted engineering-based study provides the documentation and methodology the IRS expects to see if your return is ever examined. Our studies are built to withstand IRS scrutiny.

Form 3115 is the IRS Application for Change in Accounting Method. It is used to retroactively apply cost segregation to a property that was previously depreciated using the straight-line method. This allows you to claim all missed accelerated depreciation from prior years in a single tax year, creating a large deduction without needing to amend previous tax returns.

Yes. If you are renovating a rental property, a cost segregation study can be conducted on both the original property and the renovation costs. Additionally, a partial asset disposition study can identify components being replaced, allowing you to write off their remaining book value in the year of renovation.

Common components reclassified into shorter recovery periods include appliances, carpeting, cabinetry, countertops, specialty lighting, window treatments, security systems, landscaping, driveways, patios, fencing, outdoor lighting, and decorative fixtures. The specific components vary by property type and features.

Rental income is generally classified as passive, meaning deductions can only offset passive income. However, investors who qualify as Real Estate Professionals under IRC Section 469 can use passive losses to offset active income. Additionally, short-term rental properties with an average guest stay of seven days or less may be treated as non-passive if the owner materially participates.

While CPAs are qualified to advise on the tax implications, a cost segregation study requires engineering expertise to identify and classify building components. The IRS expects cost segregation studies to be prepared by professionals with engineering or construction knowledge. Stratum works directly with your CPA to implement the study.

We generally recommend cost segregation for properties with a purchase price of $150,000 or more (excluding land). Below this threshold, the study fee may not be justified by the tax savings. However, portfolio investors with multiple lower-value properties can still benefit from batch processing and portfolio-level strategies.

Yes. Stratum Cost Segregation serves property investors in all 50 states. Our desktop analysis methodology allows us to deliver high-quality, IRS-compliant studies regardless of property location. We have completed studies in every major market and vacation rental destination in the country.

After receiving your cost segregation report, you or your CPA uses the asset classifications and depreciation schedules to file the appropriate forms with your tax return. For new properties, the accelerated depreciation is included on your current-year return. For existing properties, your CPA files Form 3115 to claim prior-year missed depreciation.

Yes. The fee for a cost segregation study is fully tax-deductible as a business expense (investment expense) in the year it is paid. This further increases the return on investment of the study.

Savings vary based on property value, type, and your tax bracket. As a general rule, a cost segregation study can accelerate 20-40% of your property's depreciable basis into 5, 7, and 15-year categories. For a $400,000 property, this could mean $60,000 to $120,000 in first-year deductions, translating to $15,000 to $45,000 in tax savings depending on your marginal tax rate.

Stratum focuses exclusively on residential rental properties for STR and LTR investors. Our engineering-based methodology, 14-day turnaround, flat-fee pricing, and IRS audit-ready documentation set us apart. We also offer portfolio pricing, CPA coordination, and Form 3115 guidance as standard inclusions with every study.