Tax strategy is playing a more prominent role in real estate investment as market conditions shift and tax regulations change. Brian Kiczula, a cost segregation specialist and owner of CostSegRx, works with property owners nationwide and offers a view into how investors are adapting their approaches in response.
From Mortgage Lending to Tax Planning
Kiczula’s entry into cost segregation followed an unconventional path. He began his career in real estate mortgages in San Diego in 2002, experiencing the full arc of the housing boom and bust while working with homebuilders. After health issues forced him to step back from work in 2019, he transitioned into tax preparation, applying his experience from two decades of analyzing tax returns for lending.
“Nobody really grows up thinking they want to be a cost segregation professional,” Kiczula says. “But because of my background in real estate, mortgages, and then taxes, I stumbled into cost segregation. It blended together all of my skill sets.”
He finds the work rewarding beyond its technical demands. “I love real estate. I love looking at different projects and working with clients across the country,” he explains. “The nice thing about what I do is I get to travel out to different projects, whether a client’s building a storage facility, or maybe they acquired some restaurants, or they’re converting an old Kmart building into self-storage facilities.”
How Cost Segregation Works
Cost segregation enables real estate investors to accelerate depreciation on investment properties by separating assets into components with shorter depreciation periods. Typically, residential properties depreciate over 27.5 years and commercial properties over 39 years. Cost segregation identifies elements – such as site improvements or building fixtures – that can be depreciated in five or 15 years instead.
“We carve up the property into its individual cost components,” Kiczula says. “We start by looking at site improvements – driveways, roads, fencing, landscaping – everything outside the building footprint is considered a 15-year asset. Then we go into the building and look at assets accessory to the business: appliances, window coverings, removable flooring, decorative lighting. All of those are five-year assets.”
This approach is especially effective when paired with bonus depreciation, which allows investors to deduct the entire value of these short-life assets in the first year. “Because of bonus depreciation, you can take all of them in year one. It’s a way to accelerate the depreciation on properties that investors are acquiring,” Kiczula notes.
Trends in Real Estate Investment
Through his work, Kiczula observes investment activity across various markets. “I can see which markets real estate investors are acquiring property in and their cadence of acquisitions. A lot of my clients will acquire properties every year in different markets,” he says.
Geographic arbitrage is a common strategy. “If you live in San Diego or LA and you’re trying to buy any type of real estate, you’re probably looking in different areas – Texas or Arizona – somewhere that’s more cost-effective to generate the return on investment you need.”
However, not all markets require investors to look elsewhere. “If you’re in the Dallas Fort Worth market, you’re probably investing in the Dallas Fort Worth market, because you’re most likely going to be able to identify deals. But that’s not true in all markets.”
Shifts in Property Types and IRS Rules
Residential properties make up the majority of Kiczula’s business, but changes in IRS guidance are affecting how investors use cost segregation. “The IRS updated their audit technique guidelines early in 2025, which pulled back some of the accelerated depreciation I’m taking on residential properties,” he says.
Even with these changes, certain segments remain active. “We’re seeing an uptick on Airbnbs because they’re using the short-term rental loophole to offset active income with the active losses their properties are generating.”
Kiczula’s work also covers a wide range of commercial properties, including medical offices, hotels, and less traditional assets. “I think it’s fascinating when clients buy RV parks, because you think of an RV park and it’s really mostly site improvements – they’re putting in amenities for business activity use, and we’re able to pull forward almost all of those as short-life assets,” he says.
Some property types offer particularly strong depreciation benefits. “Car washes have probably seen them pop up across the country, and it’s because they offer a lot of short-life assets you’re able to pull forward. Gas stations are always going to have a lot of accelerated depreciation,” Kiczula explains.
Cost Segregation Becomes More Accessible
Contrary to the assumption that only large-scale or sophisticated investors use cost segregation, Kiczula sees growing interest among smaller property owners. “We’re seeing people that had never heard about cost segregation start using cost segregation studies. The client that may own one or two rental properties is now calling me,” he says.
This trend is driven by increased awareness among CPAs and the temporary return of 100% bonus depreciation. “Cost segregation has been something that more CPAs are learning about, especially with bonus depreciation. All of a sudden, cost segregation tends to be on the mind of clients and CPAs on smaller projects, where historically you would only do cost segregation studies on larger properties,” Kiczula says.
Strategic Implications for Investors
Kiczula stresses that cost segregation is only appropriate for long-term hold strategies. “If they’re looking at truly a fix and flip, that’s more of an inventory item, so they wouldn’t be able to depreciate the asset,” he says. “Even if they’re planning on selling within the next couple of years, I would advise them not to do a cost segregation study, because they’re going to have depreciation recapture.”
The difference between active and passive investment is also crucial. “If there’s material participation by you as the investor and you’re able to offset active income, then cost segregation becomes very powerful. If you’re strictly a passive investor, you can only offset passive income,” Kiczula explains.
This impacts how investors structure their deals. “You might not want to get into a syndication-type transaction if you’re trying to use accelerated depreciation to offset active income, because as a limited partner, you’re going to be a passive partner.”
Looking Ahead: Industry and Investor Guidance
The cost segregation field is experiencing pressure to adopt new technologies, but Kiczula cautions that growth must not come at the expense of accuracy. “There’s a push in the industry to bring AI into workflows, and that’s certainly tempting, but it has to be done in a very deliberate manner so you can still maintain quality of work while growing your business.”
For investors considering cost segregation, Kiczula recommends reviewing both current and past acquisitions. “Clients always think they can only do cost segregation studies on properties they’ve acquired in the current tax year. We can certainly do look-back studies. If you acquired a property in 2020, 2022, 2023, feel free to send it in for a free estimate.”
Proper planning and professional advice remain essential. “Bring in your CPAs, your financial advisors, your tax attorneys. Make sure your strategy really works the way you want it to, and then move forward with the transaction,” he advises.
As cost segregation becomes more widely adopted – even among small-scale investors – its role in shaping real estate investment strategies is expanding. Greater awareness among professionals and changes in tax law are making the technique accessible to a broader segment of the market. For many investors, understanding and applying cost segregation has become a critical part of maximizing returns and managing portfolios in a more complex investment landscape.
