Questions to Ask Your CPA Before Ordering a Study

Your tax preparer knows your return, your entity structure, and your history. A study should fit into that picture, not be bolted on. Bringing good questions to the conversation will save time and reduce surprises. The list below is organized by topic so you can choose what applies.

About usability

• Based on my income and participation, would the added depreciation be allowed against my other income this year, or would part of it be suspended?
• Do I currently meet real estate professional status, and could I document it if asked? See Real Estate Professional Status and Study Decisions.
• If this is a short-term rental, does my average stay and my participation support treating it as nonpassive? See The Short-Term Rental Rules Explained Carefully.
• Which limits could interact with a larger deduction, such as the excess business loss limit? See At-Risk and Excess Business Loss Limits.

About timing and method

• Is this property in its first year of service, or would I need a method change to catch up? See Year of Acquisition: Why Timing Matters for a Study and Catch-Up Depreciation With Form 3115.
• What are the deadlines for filing any method change with this year's return?
• Would the catch-up adjustment be taken all at once, and how would that affect my year's income?
• Does my state follow the same depreciation rules? See State Conformity to Federal Bonus Depreciation.

About bonus depreciation

• What bonus depreciation rules apply to my property, given when I acquired and placed it in service? See Bonus Depreciation: Rules as Currently Understood (Verify).
• Do I want to elect out of bonus for any class, and what would that mean?
• How do Section 179 and bonus interact for my property type? See Section 179 Versus Bonus Depreciation for the Study Decision.

About the sale side

• If I sold in three years, in ten years, or never, what would the tax picture look like? See Depreciation Recapture on Sale: What Comes Back.
• Do I plan to use a Section 1031 exchange, and how would prior depreciation carry over? See Section 1031 Exchanges and Depreciation Recapture.
• How would remaining basis in replaced components be handled if I renovate? See Partial Dispositions, Replaced Components, and Studies.

About the provider and the work

• What qualifications and methods do I need to see in a provider? See How to Vet a Cost Segregation Provider.
• Has your office implemented studies before, and do you accept reports from any provider?
• If the return is questioned, who supports the study and at what cost? See Audit Defense and Documentation for Cost Segregation.

About logistics and costs

• What additional preparation fees should I expect?
• What records will you need from me, and by when?
• How will the asset schedule be tracked in future years?

About your specific structure

• Who will claim the depreciation deductions, me, an entity, or my partners? See Entities and Who Gets the Deduction.
• Does my operating agreement or lender have any requirement related to the study or to reporting?

How to use the answers

Write the answers down. If the answers show that the deductions are usable, the property is large enough, and the exit picture is acceptable, you have a much firmer basis for going ahead. If several answers are unclear, resolve them first. It is completely reasonable to ask for a written summary of the conclusions.

If you do not have a preparer who works with real estate

You may want to consult someone who does before ordering. A discovery conversation with AE Tax Advisors is one way to get a second view of these questions. It is an educational conversation, not a commitment. Whoever you consult, be wary of anyone who answers without asking about your facts.

How to phrase the questions

Preparers respond well to specific questions. Instead of asking "should I do a cost segregation study", ask "given my income, participation, and plans, would a study's added deductions be usable in the next two years, and what would be the sale-side cost in a three, seven, and ten year hold". The second version invites a computation. It also signals that you have thought about the exit.

What to bring

Bring your last two returns, the property's closing statement, any appraisal, a list of improvements, your expected income for the coming year, and your notes on hours if you rely on participation. Bring the quotes and the sample report if you have them. The more concrete your materials, the shorter and more valuable the meeting.

Following up

After the meeting, ask for the conclusions in writing, even a short email. Note the assumptions the preparer used, such as rates and whether a bonus percentage was assumed. If assumptions change, you can ask for an update.

If your preparer is not the right fit

Some preparers do not work with depreciation studies. That is not a criticism. If the study matters, you might ask for a referral or seek a second opinion from someone with real estate experience. Whoever signs the return must be comfortable with the position.

Keep the list short in the meeting

If you only have time for three, ask about usability, timing and method, and the sale side. Those three decide most cases. Return to the Cost Segregation Decision Checklist when you are ready to score the decision.