Can You Do Cost Segregation on a Rental You Already Own?

Begin with the filed history

An existing property needs more than the original closing statement. Obtain the depreciation detail from the actual returns, placed-in-service date, additions, dispositions and any prior accounting-method changes. A bookkeeping asset list may differ from the tax schedule. Identify the differences before anyone calculates a catch-up adjustment.

Do not restart the building at today’s value

A look-back analysis does not create a fresh purchase or erase depreciation already taken or allowable. The study and implementation need to connect the original basis, component treatment and historical deductions. Retain the old schedule so the preparer can trace the transition and prevent assets from remaining on both schedules.

Ask the preparer to select the procedure

Form 3115 may be relevant to changing an accounting method, but the correct route depends on the actual facts and applicable procedures. Do not assume every prior-year issue is fixed by an amended return, or that every study uses the same filing process. Ask which year is affected, who prepares the work and what deadlines apply.

Order the evidence before the estimate

If a former preparer has the only tax depreciation file, request it first. Provide acquisition support and each later project as separate cost periods. The most useful discovery conversation identifies whether the history can be reconciled and what implementation will cost, rather than promising a catch-up deduction from the property’s current market value.

Continue with your property decision