San Diego Cost Segregation CPA Worksheet

What this worksheet covers

Use this page as a one-stop checklist when filing a federal return that includes a Cost Seg Smart San Diego study. Sections: (1) property data your CPA needs from the study, (2) Form 4562 line mapping for current-year placed-in-service, (3) Form 3115 §481(a) lookback worksheet for prior-year studies, (4) material participation log template for §469 STR loophole, (5) California state filing notes.

Property data checklist (from the study PDF)

Before mapping to Form 4562, confirm the study contains all data you need to file. Cost Seg Smart 35–45 page PDFs include each item below. If something is missing or unclear, email [email protected] for clarification.

• Property characteristics: address, APN (SDC Assessor), purchase price, acquisition date, placed-in-service date, square footage, year built, property type (SFR / STR / condo / MF / commercial).
• Land allocation: total purchase price minus land value = depreciable basis. Cost Seg Smart studies cite source (SDC Assessor records, customer-provided appraisal, or statistical model) and show the calculation.
• Component-level breakdown: RSMeans 2024 cost basis per component, MACRS classification per Rev. Proc. 87-56, recovery period (5/7/15/27.5/39).
• Reconciliation factor (S): the scalar applied so component sums match depreciable basis to the penny.
• Year-1 schedule: bonus depreciation calculation, Year-1 deduction by MACRS class.
• Multi-year schedule: depreciation projection through full recovery period (Years 1 through 27.5 or 39).
• Form 3115 §481(a) section (if lookback): cumulative missed depreciation calculation by class.
• Engineer attestation: licensed engineer's signature and methodology attestation page.
• 13 IRS ATG quality elements: methodology section addressing each Pub 5653 §3.4 element.

Form 4562 line mapping (current-year placed-in-service)

For a property placed in service in 2025 with a Cost Seg Smart study, the depreciation deduction lands on Form 4562. Mapping by MACRS class:

Cost Seg Smart studies include a "Form 4562 mapping table" page that translates the per-component breakdown into line-by-line form entries. Use this directly — it eliminates the manual translation step.

Form 3115 §481(a) lookback worksheet

For a property owned 2+ years without a prior cost-seg study, file Form 3115 (Application for Change in Accounting Method, Designated Change Number 7) with your current-year return. The lookback claim runs as a §481(a) catch-up adjustment — no amended returns required.

§481(a) calculation

Filing checklist

• Form 3115: file with current-year return; DCN 7 (depreciation method change).
• Automatic consent: no IRS approval needed in advance for DCN 7.
• §481(a) adjustment: claim full amount in current year (positive adjustment is deductible in one year; negative is spread over 4 years if applicable).
• Cost Seg Smart study: attach methodology section + depreciation schedule as supporting documentation.
• Audit trail: retain the engineer-attested study PDF + Form 3115 working papers indefinitely.

Material participation log template (§469 STR loophole)

For San Diego Airbnb / STR owners claiming §469 7-day average-stay treatment to make losses non-passive, the IRS expects documented material participation. The seven §469 tests are in Treas. Reg. §1.469-5T. The most commonly used: 100 hours + nobody does more.

What counts as material participation hours

• Booking management: responding to guest inquiries, screening guests, managing platform listings (Airbnb, VRBO, direct booking).
• Cleaning coordination: scheduling cleaners, inspecting between guests, sourcing cleaning supplies. (Cleaner labor itself doesn't count, but YOUR coordination time does.)
• Maintenance & repairs: handling maintenance requests, sourcing repairs, doing handyman tasks personally.
• FF&E refreshing: sourcing furnishings, restocking supplies (coffee, soaps, paper goods), seasonal updates.
• Marketing: updating listings, photography, pricing strategy, seasonal pricing campaigns (peak summer, holiday weekends, San Diego Comic-Con week).
• Financial management: bookkeeping, expense tracking, reservation accounting (excludes time spent with your CPA on tax filing).

Log template (example day)

Cumulative target: 100+ hours/year for the 100-hour test. Most self-managing San Diego STR owners clear this by mid-summer from peak-season activity (Memorial Day through Labor Day typically logs 60–80 hours alone).

California state filing notes (§168(k) decoupling)

Parallel California schedule worksheet

For a $1.45M Pacific Beach STR with Cost Seg Smart study showing $238,232 reclassified into 5/7/15-year MACRS:

Maintenance discipline

Each subsequent tax year requires the same dual schedule. CA Schedule CA(540) reports the depreciation difference as a state addback or subtraction. CPA workpaper must track:

• Federal MACRS schedule (from study) with 100% bonus in Year 1.
• California straight-line schedule on the full basis, no bonus, recovering over MACRS class life.
• Annual reconciliation for CA Schedule CA(540) addback (Years 1–N) or subtraction (later years when CA depreciation exceeds federal).
• Sale-year recapture differential if property is sold — federal vs. CA accumulated depreciation differs.

San Diego property tax (1% Prop 13 base + Mello-Roos special districts where applicable) is a separate concern from cost segregation. SDC Assessor reassessments affect property tax, not federal depreciable basis. Cost-seg basis = acquisition cost from closing disclosure + capital improvements − land value, independent of Prop 13 or Mello-Roos.

For STRs: San Diego STRO Tier 1–4 licensing (and Coronado's separate ordinance) is operational, not federal-tax. They don't change cost-seg eligibility. The federal-side requirement is that the property must be legally rentable in the tax year you claim the deduction — make sure the STRO license is active. Tier 1 (home-share) is the only tier where basis allocation gets complicated — only the rental portion qualifies, and an engineer scopes it.

Audit defense quick reference

If the IRS examines a Cost Seg Smart San Diego study, the response path is well-defined:

Free CPA response is included with every Cost Seg Smart study — no add-on fee, no audit-defense subscription. Full audit-defense methodology at costsegsmart.com/methodology/audit-defense/.