# Who is qualified to perform a cost segregation study?

What the IRS says about preparer qualifications, why engineering and tax knowledge both matter, whether you can do your own study, and how to check a preparer.

## Short answer

Anyone may prepare a cost segregation study; the IRS prescribes no qualifications for preparers. That is not the same as saying anyone is qualified. The IRS's own Audit Techniques Guide tells examiners that a preparer's credentials and expertise bear on the quality of a study, that engineering-based work is generally more reliable, and that a quality study identifies the preparer and references their credentials and experience. In practice a qualified preparer has three things: construction and cost competence, working knowledge of depreciation law, and a workpaper discipline that reconciles to the real numbers. This article explains where the line sits, whether you can do your own study, and how to check a preparer before you rely on one. It is general education, not tax advice.

## What the IRS actually says about preparers

The Cost Segregation Audit Techniques Guide is written for IRS examiners, which makes it the most useful public statement of what the government expects to see. On preparers it makes three points.

1. **No prescribed qualifications.** There is no license, registration or exam that a person must hold before preparing a study.
2. **Expertise affects quality.** The guide says a preparer's credentials and level of expertise may have a bearing on the accuracy and quality of a study. It describes a study prepared by a construction engineer as generally more reliable than one prepared by someone with no engineering or construction background, and adds that construction knowledge alone is not the only criterion: experience in cost estimating and allocation and knowledge of the applicable law matter too.
3. **The preparer is identified.** A quality study names who prepared it and references their credentials, experience and expertise. Anonymous studies are a red flag on their own.

The guide then lists the principal elements it expects in a quality study: a described methodology, appropriate documentation, interviews with the right people, consistent nomenclature and numbering, a legal analysis that supports each classification, unit costs and take-offs, an organized asset list, reconciliation of allocated costs to actual costs, treatment of indirect costs, identification of section 1245 property and consideration of related issues such as a change in accounting method. Qualification, in the practical sense, is the ability to deliver every one of those elements.

## Why the work needs two kinds of knowledge

A study answers a tax question with construction evidence. Each half fails without the other.

| Without construction and cost competence | Without depreciation law competence |
|---|---|
| Building systems are misidentified on the site walk or never inspected | Items are placed in the wrong recovery period with no legal reasoning |
| Quantities are guessed and costs are borrowed from rules of thumb | Section 1245 and section 1250 property are confused, which matters again on a later sale |
| Indirect costs are allocated arbitrarily | Placed-in-service and acquisition dates are handled incorrectly, which changes the bonus depreciation result |
| The reconciliation does not tie to the basis | The change-in-accounting-method mechanics for an existing building are missed or misfiled |

The history of the practice explains why both matter. The Tax Court's 1997 decision in Hospital Corporation of America allowed a taxpayer to classify parts of its buildings as section 1245 property using principles developed under the old investment tax credit. Every classification since then rests on a legal argument about function, and every dollar assigned to that classification rests on a cost fact. A preparer who can only do one half produces a study that looks complete and is not.

## Approaches the IRS recognizes, and what they say about the preparer

The Audit Techniques Guide describes the approaches used to prepare studies. At the top is a detailed engineering approach based on actual cost records, where the preparer works from the real construction or purchase documents. Below that sit approaches built on engineering estimates when records are unavailable, then survey or letter approaches, residual approaches that subtract identified components from the total, sampling or modeling for large portfolios, and finally rule-of-thumb approaches, which the guide treats as the least reliable.

The approach a preparer defaults to tells you a great deal about their qualification. Someone who begins with the drawings, the pay applications and a site visit is doing the work the guide describes. Someone who starts with "buildings like this are usually 25 percent short-lived" is not, whatever their title.

## Can I do my own cost segregation study?

Legally, yes. There is no rule that a study must be prepared by a third party. Practically, three things decide whether you should.

- **Can you produce the elements?** Read the list of principal elements above. A self-prepared study that lacks a legal analysis for each classification, unit costs supported by records or a documented estimating method, and a reconciliation to basis is a spreadsheet, not a study.
- **Will it survive examination?** The guide tells examiners to request the complete study, workpapers, construction documents and the preparer's qualifications. A self-prepared study is examined against the same list as any other.
- **Who applies it to the return?** The study is only an input. Your tax adviser decides whether accelerating depreciation makes sense for your facts, including passive activity limits and your plans to hold or sell, and handles the return mechanics. Talk to that adviser before you spend money or time on any study, self-prepared or not.

Software that produces a study from a questionnaire does not change this analysis. The question is still whether the output contains the elements and whether a person with the two kinds of knowledge stands behind it.

## Do engineers, CPAs or appraisers have an advantage?

Each profession brings one part of the picture.

- **Engineers and construction professionals** bring the technical reading, quantification and cost-estimating skills the guide singles out. They need the depreciation law.
- **CPAs and tax practitioners** bring the law, the return mechanics and, for those who practice before the IRS, the professional standards of competence and diligence in Circular 230. They need the building.
- **Appraisers** bring land and building allocation, inspection habits and market evidence. They need the classification framework and the workpaper standard examiners expect.

None of these licenses is a cost segregation license, because none exists. A qualified preparer is someone who has closed the gap their profession left, and can show it in the file.

## How to check a preparer before you rely on them

Ask for evidence, not adjectives.

1. **Who will prepare and who will review?** Names, roles and backgrounds for both. The guide expects the preparer to be identified in the report.
2. **What approach will you use, and why?** Listen for actual cost records, drawings, a site visit and a documented estimating method where records are missing. Be wary of percentages.
3. **Show me a redacted sample report.** Look for the methodology section, the legal analysis behind classifications, the asset list, the reconciliation to basis and a statement of assumptions and limitations.
4. **How do you handle an existing building?** A building placed in service in an earlier year needs a change in accounting method; a preparer who has not heard of that is not ready for that engagement.
5. **What is your role if the study is examined?** Get the answer in the engagement letter.
6. **Can I verify your credential?** A real credential is verifiable through the issuing body. NBCSS credentials are checked at a public verification page, and the NBCSS directory labels self-reported background as such while credential status comes only from verified records. Apply the same test to any body: if you cannot verify it, treat it as unverified.
7. **Who is your tax adviser talking to?** A qualified preparer expects to work with your adviser, not around them.

## Red flags

- A fee quoted as a percentage of "tax savings" with no scope of work.
- A promised result before anyone has seen the closing statement or the building.
- No site visit for a property that warrants one, and no explanation of why not.
- A report with totals but no asset list, no methodology and no reconciliation.
- Language claiming government approval. No preparer, method or organization is approved by the IRS for cost segregation; the IRS publishes expectations, not endorsements.
- Reluctance to identify the preparer or to put their qualifications in the report.

## Limits of this article

This article describes what the IRS publishes for its examiners and what a qualified preparer looks like in practice. It does not tell you whether a study is worthwhile for a particular property; that depends on the basis, the property type, your other income, how long you plan to hold, and rules such as the passive activity limits, all of which belong in a conversation with your tax adviser.

## What people ask on Reddit and other forums

The searches that lead people to these threads are usually phrased "IRS audit techniques guide".

The "cost segregation reddit" threads on r/realestateinvesting and r/tax ask versions of the same qualification question. Here are the ones that come up most, answered from the sources below.

**"Can my CPA do the cost seg, or do I need an engineering firm?"** Either may, and neither is required. The IRS prescribes no qualifications. What matters is whether the preparer can deliver the elements the IRS guide lists, which needs construction and cost competence as well as the law. Many CPAs review a specialist's study and apply it rather than preparing it.

**"Is a $500 online cost seg study legit?"** Ask what it contains. If there is no site visit where one is warranted, no take-offs, no legal analysis and no reconciliation, it is a questionnaire with a percentage, which the IRS guide treats as the least reliable approach.

**"Does a cost seg study raise my audit risk?"** No public IRS statement supports that, and this article makes no claim either way. What the IRS does publish is what its examiners look for, which is why the study's quality is the variable you control.

**"How do I know the person is actually qualified?"** Verify any credential with the issuing body, read a redacted sample against the IRS guide's list, and ask for references from tax advisers who relied on the work.

## Questions people also ask

### Does the IRS approve or certify cost segregation preparers?

No. The IRS prescribes no qualifications and approves no preparers. Claims of IRS approval are false.

### Is a cost segregation study required to be done by an engineer?

No. The IRS guide describes engineering-based studies as generally more reliable and lists cost estimating experience and legal knowledge as further criteria, but no rule requires a licensed engineer.

### Can my CPA do the study?

A CPA may prepare a study if they have the construction and cost competence to deliver the elements the IRS expects. Many CPAs instead review a specialist's study and apply it to the return, which is the more common division of labor.

### What makes a study "quality" in the IRS's eyes?

The Audit Techniques Guide lists principal elements: an identified, experienced preparer, a described methodology, appropriate documentation, interviews, consistent nomenclature, a legal analysis for classifications, unit costs and take-offs, an organized asset list, reconciliation to actual costs, treatment of indirect costs, identification of section 1245 property and consideration of related issues.

### How do I know the person is who they say they are?

Verify any credential through the body that issued it, ask for named references from tax advisers who have relied on the preparer's work, and read a redacted sample against the IRS list of elements.

## Sources

- https://www.irs.gov/pub/irs-pdf/p5653.pdf — IRS Publication 5653, Cost Segregation Audit Techniques Guide (Rev. 2-2025): Chapter 3, Cost Segregation Methodologies; Chapter 4, Principal Elements of a Quality Cost Segregation Study and Report; Chapter 5, Review and Examination of a Cost Segregation Study.
- https://www.leagle.com/decision/1997130109btc211129 — Hospital Corporation of America v. Commissioner, 109 T.C. 21 (1997).
- https://www.irs.gov/publications/p946 — IRS Publication 946 (2025), How To Depreciate Property: Chapter 1 and Chapter 4, Table 4-1.
- https://www.irs.gov/pub/irs-pdf/pcir230.pdf — Treasury Department Circular No. 230, §10.22 and §10.35.
- https://nbcss.org/standards — NBCSS standards and governance: verification, ethics and records.

## Related reading

- [How to hire a cost segregation practitioner](/articles/how-to-hire-a-cost-segregation-practitioner)
- [What a cost segregation study does](/articles/what-a-cost-segregation-study-does)
- [How to become a cost segregation specialist](/articles/how-to-become-a-cost-segregation-specialist)
- [How to read a report's limitations](/articles/reading-report-limitations)
- [When to involve a tax adviser](/articles/when-to-involve-a-tax-adviser)
- [Find a practitioner in the NBCSS directory](/directory) · [Verify a credential](/verify)

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Canonical: https://nbcss.org/articles/who-is-qualified-to-perform-a-cost-segregation-study
Published: 2026-09-25 · Last content change: 2026-09-25
Not professional advice: general educational information from the National Board of Cost Segregation Specialist (NBCSS); not accounting, tax, legal, financial, investment or engineering advice. Verify with a licensed CPA, enrolled agent, attorney or other qualified adviser before acting.