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Cost Segregation Basics

Why you cannot do cost segregation with a spreadsheet

Software will happily produce a number. It cannot produce the evidence that makes the number defensible.

Deprecio 20 June 2026 4 min read

What the spreadsheet does

It applies a percentage. Enter a basis and a property type, out comes an allocation. Ten seconds, no fee.

The number may even be roughly right. What it is not is supported, and support is the entire product.

What support means

Support means a component list built from an actual takeoff of an actual building. It means each item priced from construction records or documented cost data. It means a stated legal basis for each classification, tied to the regulations and cases that define personal property. It means photographs proving the components exist and are configured the way the report says they are. It means a reconciliation showing the total costed equals your capitalised basis.

An examiner asked to accept a reclassification does not want a percentage. They want to see how you got there.

The specific things a model cannot know

Whether the HVAC serving the second floor is dedicated to tenant process equipment or conditioning the space generally. Whether the flooring is glued or floating. Whether the parking lot was repaved in 2019 and the old one is still on the schedule. Whether the electrical panel labelled 'kitchen' actually feeds cooking equipment. Whether the landscaping sits against the building or at the property line.

Every one of those changes the answer, and none of them is in a spreadsheet.

Where estimating tools legitimately fit

Feasibility. Our own estimator does exactly this, and it says clearly what it is: a planning range to decide whether to commission real work. That is a fair use. Filing a return on it is not.

The economics

A study fee is a small fraction of the deduction it produces, deductible itself, and it comes with support if the return is examined. The saving from doing it on a spreadsheet is measured in thousands. The cost of an unsupported position that gets adjusted, with interest and possibly penalties, is measured in multiples of that.

Where this stops. This article is general information, not tax advice, and it cannot account for your basis, your entity, your participation or your state. A free feasibility review takes twenty minutes and gives you an answer specific to your property.

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The study is one piece. We can handle the rest of the return.

Deprecio is part of the Shurek Accounting & Tax family of brands. If you want the study and the tax work under one roof — the return, the Form 3115, entity structure, quarterly estimates, multi-state filings — that is a single engagement, not a hand-off between two firms.

No-cost feasibility review

Find out what your building is hiding.

A feasibility review is free and takes about twenty minutes. Bring the closing statement and the depreciation schedule; we will tell you plainly whether a study pays for itself.

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