IRS Cost Segregation Audit Techniques Guide
IRS Publication 5653 explains how IRS examiners review cost segregation studies. It is useful guidance, but by its own terms it is not authority, and the February 2025 revision predates the July 2025 law. It is not an IRS-approved study format.
Educational information, not tax advice.
Updated 2026-10-14
Key takeaways
- Current revision: Publication 5653 (Rev. 2-2025), listed on the IRS ATG index with publication date 02/2025.
- The IRS index says ATGs help examiners and can also be useful to taxpayers and practitioners.
- The guide states it cannot be used, cited, or relied upon as an official pronouncement of law.
- It describes study approaches, quality-study elements, and industry matrices.
- It is not an IRS-approved study format, and it does not certify any preparer.
The Cost Segregation Audit Techniques Guide (ATG) is written for IRS examiners. The current revision is Publication 5653, dated February 2025. The IRS Audit Techniques Guides index lists it under “Cost Segregation” with publication date 02/2025 and describes it as a comprehensive guide to assist examiners in evaluating studies submitted in support of depreciation deductions, and as also beneficial for taxpayers and practitioners preparing studies.
The guide states that it is not an official pronouncement of the law or the position of the IRS and cannot be used, cited, or relied upon as such. The ATG index adds that guides are current through the publication date and that no guarantee is made about technical accuracy after that date. The February 2025 revision predates Public Law 119-21 (July 4, 2025).
The IRS has not established requirements or standards for preparing studies. There is no IRS-approved study, IRS-compliant study format, or prescribed preparer credential in the guide. Engineer-certification language on a marketing page is a staffing claim, not an ATG mandate. CostSeg SI does not claim that Super Intelligence, extraction, estimating, or engineer certification is operational.
The guide is still the most detailed public statement of what IRS examiners look for. It covers the legal framework, study approaches, elements of a quality study and report, how examiners review a study, special topics, and industry-specific guidance. Those descriptions are examiner tools, not a statute.
This page is educational information, not tax advice. Citing the ATG as if it were the Code, or treating a matrix row as a classification rule for every building, would misstate its status. Super Intelligence is a proposed workflow for organizing facts against the same tests examiners use — not an operational claim that any agent has certified a study.
Study approaches
The guide describes six approaches: detailed engineering from actual cost records, detailed engineering cost estimates, survey or letter, residual estimation, sampling or modeling, and rule of thumb. It calls the first generally the most methodical and accurate, and says rule-of-thumb studies should be viewed with caution.
Those labels describe how costs are assigned, not which MACRS class is correct. A detailed engineering study can still misclassify a structural component. A less detailed approach can still be right on a simple asset if the records and the law support it.
The ATG is not a scoring system that turns an approach name into an “IRS-approved” report. Examiners are told to evaluate the study in front of them.
Quality-study elements and industry matrices
The guide lists elements of a quality study and report, including use of contemporaneous cost records, a site inspection, and a clear explanation of the legal analysis. Identification of §1245 property is among the items discussed. The list is examiner guidance, not a regulation.
Chapter 7 contains matrices for retail, restaurants, pharmaceutical and biotechnology, casinos, auto dealerships, auto manufacturing, and residential rental property. If a return follows a matrix, examiners are directed not to adjust its categorization and lives. Each matrix says it reflects that industry’s general facts and may not apply elsewhere.
A matrix row is not a holding that an asset “is” 5-year property in every building. Courts have split on the same asset type depending on facts and circuit. The ATG itself notes limits on some older cases.
What is out of date
The February 2025 revision predates Public Law 119-21 (July 4, 2025), so its bonus depreciation discussion does not reflect the current 100 percent rule for qualified property acquired after January 19, 2025, as of October 16, 2026. Use Notice 2026-11 and the statute for the rate.
Older HTML chapter pages on irs.gov no longer load; the PDF is the current source. The index page confirms the 02/2025 date and the usual ATG currency caveat.
No IRS announcement of a post-2025-law update to Publication 5653 was located for this research. If a later revision is issued, the revision date on the PDF controls.
How to use the guide
Use it to understand what an examiner is trained to request: cost records, inspection notes, class-life citations, and a reconciliation to basis. Do not use it as a substitute for §168, Treas. Reg. §1.48-1, or a court opinion.
Do not describe a study as IRS-approved because it followed the ATG’s outline. The guide says the Service has not set preparer qualifications or a standard report format.
Peco Foods and written §1060 allocations are discussed in the ATG as a risk in some acquisitions. That discussion is not a rule that every building purchase is bound the same way. See the basis-allocation page.
Sources
- 1IRS Publication 5653 — Cost Segregation Audit Techniques Guide (rev. 2-2025)(opens in a new tab)
Written for IRS examiners. The guide states it is not an official pronouncement of law and cannot be cited as authority. It predates the July 2025 law.
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