The Cost Seg Pitch Is Back. Here's What They're Not Telling You. | Three Things Thursday

Bonus depreciation is back at 100% — and the cost segregation pitch is everywhere. Before you buy a study, there are three things you need to understand that most of the people selling these studies aren't telling you. In this episode of Three Things Thursday, I'm breaking down what cost segregation actually requires to work, what the IRS is looking for when they review these studies, and the number at the back end of the transaction that most investors never modeled when they signed up. Here's what we cover: ▶ Thing #1 — The strategy is legitimate. Your tax situation might not be. Accelerated depreciation only helps you if you can deploy the losses. The passive activity rules determine whether that's true for you — and the people pitching the study aren't asking that question first. ▶ Thing #2 — Online instant cost seg products are not engineering studies. The IRS Audit Technique Guide was updated in 2025. The AmeriSouth case — a 2012 Tax Court decision — is now cited 21 times in that guide, nearly as many as the landmark HCA case that set the original industry standard. IRS examiners are using AmeriSouth to challenge reclassifications. Online instant tools have no engineering basis and no one to call when the IRS shows up. ▶ Thing #3 — The exit math matters as much as the entry math. Unrecaptured Section 1250 gain waits at the sale. Hold period, tax bracket at exit, 1031 exchange strategy — all of it has to be modeled before the study makes sense. A 1031 defers the recapture. It doesn't eliminate it. Cost segregation is a powerful tool in the right situation. But the pitch is moving faster than the analysis right now. These three distinctions will help you ask the right questions before you write the check. Three Things Thursday drops every week. Subscribe so you don't miss it. 🔗 Questions about your specific situation? Visit us at bourbonnaistax.com This video is for general educational purposes only and does not constitute specific tax advice for your situation. Bourbonnais Tax Associates LLC | Bill Bourbonnais, EA, CTC, CTP, CTS | bourbonnaistax.com