Documents you need for a cost segregation study

For most rental homes, a cost segregation study needs your closing statement, a land value source, proof of when the rental was ready to rent, and a record of any renovations. Look-back studies also need your prior depreciation schedule. Short-term rentals add furniture receipts, and condos add HOA documents. You don’t need everything perfectly organized. A rough spreadsheet with receipts behind it is fine.

The checklist

Document	Needed for	Why it matters
Closing Disclosure or settlement statement (HUD-1 for older purchases)	Every study	Sets the purchase price and capitalized closing costs
County assessment or tax bill	Every study	Supports the land and building split
Placed-in-service evidence	Every study	Sets the year the deduction belongs to
Renovation invoices or a cost summary	Any home with improvements	Adds to basis, often with a high share of short-life parts
Prior depreciation schedule or Form 4562	Rentals already on a return	Needed for Form 3115 and the catch-up calculation
Furniture and equipment receipts	Furnished rentals	Keeps furnishings on their own schedule
Photos	Express Studies, and helpful for all	Shows finishes, flooring, fixtures and site work
HOA declaration and CC&Rs	Condos and some townhouses	Defines what you own versus the common area

The sections below go through each one.

Closing Disclosure or settlement statement

If you send only one thing, send this. For purchases since late 2015 with a mortgage, it’s usually the Closing Disclosure. Cash purchases and older deals often have a settlement statement, and pre-2015 financed purchases usually have a HUD-1.

Not every line belongs in your basis. The lines that add to the cost of the property are the ones tied to buying it:

• Contract sales price
• Owner’s title insurance
• Settlement, escrow or closing fees
• Recording fees for the deed
• Transfer taxes
• Survey fees
• Attorney fees for the purchase
• Amounts you paid that the seller owed, such as back property taxes

Lines tied to the loan stay out. That includes loan origination fees and points, the appraisal your lender required, the lender’s title policy, credit report fees, mortgage insurance, prepaid interest, and the escrow deposits for taxes and insurance. Your CPA handles those separately, usually by spreading loan costs over the life of the loan. Your homeowner’s insurance premium and normal property tax prorations aren’t basis either.

An illustration. Say the Closing Disclosure shows a $385,000 contract price, $1,450 of owner’s title insurance, a $210 deed recording fee, $1,925 of transfer tax, a $900 settlement fee and a $450 survey. It also shows a $3,850 origination fee and a $600 lender-required appraisal. The basis is $385,000 + $1,450 + $210 + $1,925 + $900 + $450 = $389,935. The $4,450 of loan costs stay out. Land is then carved out of the $389,935, and the rest is the depreciable building.

County assessment for land value

Land isn’t depreciable, so the study needs a defensible land figure. The usual source is the county assessor’s split between land and improvements, applied as a ratio to your purchase price. Download the assessment page or the tax bill that shows both values, ideally for the year you bought.

If you have an appraisal that values the land separately, send that too. We use county data by default, and you don’t need to order an appraisal for a study. Our guide on setting land value explains when an appraisal is worth it.

Placed-in-service evidence

Depreciation starts when the rental is ready and available to rent, which isn’t always the closing date. A home bought with a tenant in place is usually in service at closing. A home that needed work is in service when the work is substantially done and you start offering it for rent. You don’t need a signed tenant.

Good evidence includes any of these:

• The date the listing went live on Zillow, Airbnb, VRBO or a property manager’s site
• A signed lease, with its start date
• A first booking confirmation
• The completion date on a contractor’s final invoice, alongside the listing date

The date matters because a December placed-in-service date puts the bonus deduction on this year’s return, and a January date moves it to next year.

Renovation records

Improvements you made before or after placing the home in service add to your basis, and things like new flooring, appliances, cabinets, decks and fencing often land on 5- or 15-year schedules. Send whatever you have:

• Contractor invoices and final bills
• A contractor’s summary of the scope and price
• Credit card or bank statements for materials bought directly
• A spreadsheet listing each project, date and cost

A spreadsheet is fine as long as you can back the numbers up. Leave out routine repairs and anything your CPA already deducted, or the cost will be counted twice. If you spent more than $80,000 on renovations, the property needs an Engineered Study rather than an Express Study.

Prior depreciation schedule or Form 4562

If the rental has been on your return for one or more years, send the depreciation schedule from your tax software or the Form 4562 from the year it was placed in service. The study has to use the same placed-in-service date and basis your returns already show. If two or more returns have been filed, the catch-up generally goes on Form 3115. See look-back studies and Form 3115.

Furniture receipts for short-term rentals

Furniture, TVs, grills and other movable items you bought separately for an Airbnb belong on their own schedule. They aren’t part of the building’s reclassification, and mixing them in makes the study look inflated. Send receipts or a list with costs and dates. Airbnb cost segregation covers how furnished rentals are treated.

Photos

For an Express Study, photos stand in for a site visit. Take them room by room: flooring, cabinets and counters, appliances, light fixtures, bathrooms, and the exterior, including the driveway, walkways, patio, fencing and landscaping. Phone photos are fine. For an Engineered Study, the 30 to 60 minute video walkthrough does the same job, and photos are a useful extra.

HOA documents for condos

A condo owner owns the unit and a share of the common elements, and the land usually sits inside that common interest. The declaration and CC&Rs say where your unit ends. Often that’s the interior walls, sometimes the studs. That boundary decides what the study can classify. Send the declaration, or the pages that define the unit and common elements.

What to do next

Gather the closing statement and county assessment first, since those two set the basis and land. Then add the placed-in-service date and any renovation totals, and run the numbers in the calculator. With those in hand, request a free proposal. How it works shows what happens after that.

This is general information, not tax advice. Your CPA should confirm how it applies to you.