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By Amar Patel | Principal, Cost Segregation
Cost Segregation remains one of the most powerful tax strategies for real estate investors, allowing them to accelerate depreciation and maximize deductions.
On February 6, 2025, the IRS published the latest edition of the Cost Segregation Audit Techniques Guide (ATG), introducing new compliance measures. Taxpayers must stay informed to avoid costly audit adjustments.
KBKG Insight:
While the ATG is designed to provide guidance for IRS employees on what they should look for when reviewing a study, it is not entirely authoritative. Tax professionals use the document as guidance on the methods to conduct Cost Segregation studies properly. Updated sections that have been recently adjusted and expanded will provide helpful insight into the IRS’s future examination focus.
What’s New in the 2025 ATG
The latest revision of the IRS Cost Segregation ATG reflects tax law changes and additional guidance related to:
- The Inflation Reduction Act and Section 179D Deductions
- Bonus Depreciation, Qualified Improvement Property, and Section 179 Expensing
- Industry-specific guidance
- Detailed cost estimation approach and documentation standards
Sections to Note
- How to allocate primary electrical switchgear based on electrical load. (Chapter 8)
- Stand-Alone Open-Air Parking Structures are 39-year property. (Chapter 8)
Conclusion
The 2025 Cost Segregation ATG reinforces the importance of precision and compliance in Cost Segregation processes. By working with a Certified Cost Segregation Professional with a “CCSP” next to their name, real estate investors can feel safe to leverage Cost Segregation with minimal audit risks.
For a deeper dive into the guidelines, review the official IRS Cost Segregation Audit Techniques Guide here.
About the Author
Amar Patel | Principal – Cost Segregation
Amar spent over 15 years at a Big Four accounting firm, focusing on various specialty tax products, including Cost Recovery Solutions and Research & Development Tax Credits. With more than 20 years of practice, Amar has become an expert in Cost Segregation and Large Fixed Asset Depreciation reviews for purposes of identifying federal, state, and property tax benefits… Read More