Cost Segregation Authority vs AE Tax Advisors: Study Only or End to End?
Cost Segregation Authority produces engineering based studies. AE Tax Advisors produces the study, the accounting method change, and the return that reports the deduction. Which one you need depends entirely on how good your current CPA is.
The short version
The choice between a study only provider and a full service firm is not about study quality. It is about who is responsible when the study reaches the tax return.
Cost Segregation Authority is a dedicated cost segregation provider producing engineering based studies for real estate owners, with a focus on residential and commercial investment property. They do one thing, and firms that do one thing tend to do it efficiently. Their deliverable is a study report.
AE Tax Advisors performs cost segregation in house at $1 per square foot with a $2,000 minimum, and then does the three things a study alone does not: we determine before the study whether you can actually use the deduction, we prepare the Form 3115 when the property was placed in service in an earlier year, and we file the return that reports the result.
If you already have a CPA who is genuinely comfortable with Form 3115 filings, Section 481(a) adjustments, and passive activity loss planning, a study only provider is a perfectly sensible purchase and often a fast one. If you do not, the study is only the first third of the job, and the remaining two thirds are where investors most often get stuck.
Who Cost Segregation Authority is
Cost Segregation Authority is a specialist provider in a field with a lot of noise in it. They produce engineering based studies, which is the methodology the IRS Cost Segregation Audit Techniques Guide treats as the most defensible approach, and they work across residential rental, commercial, and mixed use property. Many providers in this space distribute through CPA firms and referral partners, and specialists like this generally offer a free or low cost preliminary estimate so you can see the likely benefit before committing.
The advantages of a dedicated provider are real. Volume produces process efficiency and consistency. A firm doing nothing but studies has seen more property types than a generalist, has standardized documentation, and can usually turn work around predictably. If your only question is whether the engineering is sound, a specialist is a reasonable answer.
We would also note the obvious: we are a competitor writing about them, so treat our characterization with appropriate skepticism and verify their current scope, pricing, and audit support directly. Specialist providers vary meaningfully on what happens if the study is examined, and that is worth asking about explicitly.
The three things a study alone does not do
This is the substance of the comparison, so it is worth being specific rather than gesturing at it.
First, the usability question. A cost segregation study on a $900,000 rental might reclassify enough basis to produce a $200,000 first year deduction. Whether that deduction reduces your tax bill this year depends on Section 469. If the activity is passive and you have no passive income, the loss suspends and carries forward. It is not lost, but it is not the outcome you paid for either. The deduction becomes usable this year through real estate professional status, through the short term rental exception combined with material participation, or through offsetting passive income. A study only provider generally does not analyze that, because it is a tax question about your whole return rather than a question about the building. We run it before you spend anything, and we have talked clients out of studies on that basis.
Second, Form 3115. If the property was placed in service in a prior year and you have been depreciating it on a standard schedule, you cannot simply start using the new classifications. Capturing the missed depreciation requires a change in accounting method on Form 3115, which produces a Section 481(a) catch up adjustment claiming the entire cumulative shortfall in the current year. This is enormously valuable and routinely mishandled. Many general practice CPAs have never filed one, and the study report will not prepare it for them.
Third, the filing itself. Someone has to take the asset classifications from the report and put them onto the depreciation schedule correctly, tracking the separate recovery periods, applying bonus depreciation where it is available, and carrying the basis forward properly for the eventual sale and depreciation recapture. Errors here are common and often invisible until a disposition years later.
Side-by-Side Comparison
| Cost Segregation Authority | AE Tax Advisors | |
|---|---|---|
| Primary model | Study only specialist | Study plus tax implementation |
| Engineering based methodology | ✔ Yes | ✔ Yes |
| Study pricing | Quoted per property | $1/sq ft, $2,000 min |
| Preliminary benefit estimate | ✔ Yes | ✔ Yes |
| Section 469 usability analysis | ✘ No | ✔ Yes |
| Form 3115 preparation | ✘ No | ✔ Yes |
| Section 481(a) catch-up adjustment | ✘ No | ✔ Yes |
| Tax return preparation | ✘ No | ✔ Yes |
| Real estate professional status analysis | ✘ No | ✔ Yes |
| Short-term rental material participation planning | ✘ No | ✔ Yes |
| Entity structuring | ✘ No | ✔ Yes |
| Ongoing advisory relationship | ✘ No | ✔ Yes |
| Works through your existing CPA | ✔ Yes | ✔ Yes |
| Large industrial and institutional assets | ✔ Yes | ● Not our depth |
Pros and Cons of Each
Cost Segregation Authority
Dedicated study provider
Strengths
- Focused specialist, so process and documentation are standardized
- Engineering based methodology consistent with the IRS audit techniques guide
- Preliminary estimates available before you commit
- Works cleanly alongside a CPA you already trust
- No requirement to change your existing tax relationship
Limitations
- No analysis of whether you can actually use the deduction this year
- No Form 3115, so catch up depreciation depends on your own CPA
- No return preparation, so implementation is outside their control
- Pricing quoted per property rather than published per square foot
- No entity, REPS, or passive activity planning around the study
AE Tax Advisors
Study plus full implementation
Strengths
- $1 per square foot with a $2,000 minimum, published rather than quoted
- Usability analysis run before you spend anything on the study
- Form 3115 and the Section 481(a) catch up adjustment prepared in house
- The same team files the return that reports the deduction
- Portfolio pricing that makes studies viable on mid sized properties
Limitations
- Not the right provider for very large industrial or institutional assets
- A standalone study is available, but our model is built around full engagements
- Advisory does not pencil out below roughly $250,000 of income
- We screen for fit before quoting, which adds a call to the process
- Based in Montana, so property visits are handled remotely with documentation
Which One Should You Choose?
Choose a study only provider if
You have a CPA who has filed Form 3115 before, understands Section 481(a) adjustments, and has already told you the resulting loss will be usable against your income this year. In that case you need engineering, not advice, and buying only engineering is the efficient choice.
Choose AE Tax Advisors if
You are not certain your CPA can implement the study, the property was placed in service in a prior year, or nobody has yet confirmed that the deduction will actually reduce this year's tax. Those three situations account for most of the cases where a study gets purchased and the benefit never fully materializes.
Go with a large engineering firm if
Your property is a substantial industrial facility, a complex commercial asset, or part of an institutional portfolio. That is depth we do not claim to match, and firms like KBKG and Engineered Tax Services are the right call. We are built for the individual investor and the mid sized property, not the hundred million dollar portfolio.
The one question that settles it
Ask your current CPA: "If I get a cost segregation study on a property I bought three years ago, will you file the Form 3115 to claim the catch up depreciation, and will the loss be deductible against my income this year?" A confident, specific answer means buy the study alone. Hesitation means the study is not your bottleneck.
Why Clients Choose AE Tax Advisors
- Published pricing at $1 per square foot. With a $2,000 minimum, a 2,500 square foot short term rental is $2,500 and five properties at 1,600 square feet each is $8,000 for the portfolio. Standalone providers commonly quote $5,000 to $15,000 per property, which is precisely why mid sized properties often never get studied.
- Usability comes before the invoice. We analyze Section 469 first: whether you qualify for real estate professional status, whether the short term rental exception applies and you can meet material participation, or whether you have passive income to absorb the loss. If the answer is that the deduction suspends, we tell you before you pay for a study.
- Form 3115 is routine for us, not an exception. For property placed in service in an earlier year, the catch up depreciation is claimed in the current year through a change in accounting method rather than by amending prior returns. We prepare the form as part of the engagement.
- We file the return. The classifications go onto the depreciation schedule correctly, bonus depreciation is applied where available, and basis is tracked properly for the eventual disposition and recapture. Nothing gets lost in a handoff between two firms.
- We will tell you when we are the wrong firm. Large industrial and institutional assets deserve a dedicated engineering practice, and we say so rather than stretching. We are the right answer for individual investors and mid sized property, which is most of the market.
Frequently Asked Questions
Is Cost Segregation Authority legitimate?
Yes. It is a dedicated cost segregation provider producing engineering based studies, which is the methodology the IRS Cost Segregation Audit Techniques Guide treats as most defensible. The question is scope rather than legitimacy: a study only provider delivers the engineering, and the tax implementation remains your CPA's responsibility.
How much does Cost Segregation Authority cost compared to AE Tax Advisors?
Study only providers generally quote per property based on type, size, and complexity, so you need an estimate to get a number. AE Tax Advisors publishes cost segregation pricing at $1 per square foot with a $2,000 minimum, meaning a 2,500 square foot rental is $2,500 and a five property portfolio at 1,600 square feet each is $8,000. Standalone engineering firms commonly quote $5,000 to $15,000 per property.
Do I need a cost segregation study or a tax advisor?
If your CPA is comfortable with Form 3115 filings and has already confirmed the resulting loss will be usable this year, you need a study. If either of those is uncertain, the study is not your bottleneck. A study that produces a suspended loss or never makes it onto the return correctly has not saved you anything, and that failure mode is more common than the industry admits.
What happens if my CPA cannot file Form 3115?
Then the catch up depreciation on a property placed in service in a prior year does not get claimed, which is frequently the largest single number in the whole exercise. Some investors amend prior returns instead, which is slower, more limited, and usually inferior. We prepare Form 3115 as part of the engagement, and we also file it for clients who commission a standalone study from us.
Will a cost segregation study actually reduce my taxes this year?
Only if the resulting loss is usable under Section 469. If the rental is passive and you have no passive income, the deduction suspends and carries forward rather than reducing this year's bill. It becomes usable through real estate professional status, through the short term rental exception combined with material participation, or through offsetting passive income. This should be determined before you commission a study, not after.
Can I use a study only provider and still get the Form 3115 filed?
Yes, if your CPA will prepare it. If they will not, you can commission the study from one firm and engage a second to handle the accounting method change and the return, though coordinating two firms around one deduction adds friction and cost. Having the study, the Form 3115, and the return handled by one team removes that handoff entirely.
Does a cost segregation study increase audit risk?
A properly documented engineering based study does not, and the IRS publishes an audit techniques guide describing what it expects to see. Risk comes from studies built on rules of thumb rather than engineering, from classifications that cannot be supported, and from material participation claims with no contemporaneous documentation. All three are avoidable with proper preparation.
Does AE Tax Advisors work with clients outside Montana?
Yes. AE Tax Advisors is a national practice and we perform cost segregation studies on property anywhere in the country. Our office is in Billings, Montana, documentation moves through a secure portal, and we handle multi state filings routinely.
Keep Comparing
Disclosure: this page is published by AE Tax Advisors, so we are not a neutral party. We have tried to describe the other firms accurately and fairly using their own public materials, and we say plainly where they are the better fit. Firm details, service menus, and pricing change, so verify anything that matters to your decision directly with the firm before you engage. Nothing here is tax advice for your specific situation.
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