For a property built or renovated by a general contractor, a cost segregation study is built mainly from three records: the AIA G702/G703 pay applications or invoices that list actual cost by trade, the construction drawings, and a trial balance for a property already on your books. Property photos complete the file.
For a purchased building, the documents a cost segregation study needs before you file covers the closing statement, the land-value source and the depreciation schedule.
Why Do Documents Decide a Cost Segregation Study's Accuracy?
A cost segregation study — a reclassification of building components into shorter MACRS lives — is only as accurate as the cost data behind it. The IRS Cost Segregation Audit Techniques Guide is explicit on this point: the detailed engineering approach from actual cost records (Chapter 3, C.1) uses cost information from contemporaneous construction and accounting records, with minimal cost estimating, and the guide calls it, in general, the most methodical and accurate approach.
Beverly, our platform's super intelligence (SI) engine, reads your uploaded documents and extracts every line-item cost, maps it to an IRS component category, and assigns the correct MACRS recovery period — the four recovery periods are laid out in the complete guide to cost segregation studies in 2026. The more precisely your documents capture what was built and what it cost, the more accurate and better supported your study becomes. Beverly is not guessing — she is reading your paperwork.
The good news: most property owners already have the three documents that drive most of the analysis. The ask is narrow on purpose.
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Which Three Documents Matter Most?
1. AIA Pay Applications (G702/G703 Forms)
If your project used a general contractor, the AIA Application for Payment forms — specifically the G702 cover sheet and the G703 Schedule of Values continuation sheet — are the most valuable documents you can upload. The G703 breaks the entire construction contract into individual line items by CSI trade division, with the dollar amount paid for each. This is exactly what Beverly needs: a trade-level cost breakdown that maps directly to IRS component categories — a $14M study walked through line by line shows what that breakdown turns into.
Where to find them: your general contractor submitted these forms monthly throughout construction to request payment. Your project manager, owner's representative, or accounting department should have the complete set. If you can only find some of the draws, upload what you have — Beverly identifies which draws are present and reconciles accordingly.
What if you don't have them: contractor invoices, job cards, sworn statements, and draw requests all work as substitutes and belong in the same upload category. Any document that itemizes actual costs paid per trade qualifies.
2. Construction Drawings
Architectural, structural, and MEP (mechanical/electrical/plumbing) drawings give Beverly the context to classify components that the cost documents describe but do not fully identify. A G703 line that reads "Electrical — $180,000" is ambiguous; the electrical drawings resolve whether that cost covers tenant-serving panels and specialty circuits (5-year property) or general building service (39-year property).
Where to find them: your architect, general contractor, or project management firm maintains the construction document set. PDFs of the permit set are sufficient — you do not need full-size originals. Even a partial set (architectural only, no MEP) improves classification accuracy.
3. Trial Balance
For properties that have been on your books for any period of time, the trial balance is the most authoritative source for your depreciable basis. The account codes tell Beverly exactly how much has been capitalized in each IRS category — land, land improvements, buildings, and building improvements. When a trial balance is present, it takes precedence over all other cost sources for establishing the total basis.
Where to find them: your CPA or controller runs this from your accounting system (QuickBooks, Yardi, MRI, etc.). Ask for the trial balance as of the most recent fiscal year-end, exported to Excel. If you are ordering a study for a recently closed acquisition, the closing statement (below) substitutes for a trial balance.
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Which Optional Document Most Often Changes the Numbers?
Closing Statement or Settlement Statement
Every property acquisition produces a HUD-1 or ALTA closing disclosure. For acquisitions, this document establishes the purchase price paid, which becomes the starting point for your depreciable basis.
More importantly, it often contains a land-versus-building allocation — and land is never depreciable. An accurate land allocation sets how much of the purchase price is depreciable basis available for cost segregation.
Where to find it: your closing attorney, escrow agent, or title company maintains this. For older acquisitions, it may be in your lender file or your original closing binder.
Do I Need Photos for a Cost Segregation Study?
Document uploads handle the cost side of the study. Site photos handle component identification and condition. After you upload your cost documents, our platform walks you through a structured photo checklist:
- the exterior;
- major systems (HVAC, electrical panels, fire suppression);
- finishes;
- site improvements.
These photos allow Beverly to verify component categories and flag anything the cost documents do not account for.
You can upload existing property photos or follow the guided photo checklist. Either approach works — the goal is visual documentation of what is physically on the property.
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What Is the Minimum I Need to Start a Cost Segregation Study?
If you can locate your G703 Schedule of Values and a set of construction drawings, you have what Beverly needs to produce a high-quality, well-documented cost segregation study. Everything else improves the margin. Do not let the absence of optional documents delay the process — upload what you have and Beverly will identify any gaps that are worth pursuing before the study is finalized. If you are still deciding who should run the analysis, how cost segregation firms compare covers what to look for, and a cost segregation study tells you what these documents are likely to be worth.
“A quality study uses the best available documentation to classify assets and determine costs. Documentation supporting a quality study will vary, depending on whether a property is new or used or whether original construction documents are available. Contemporaneous documentation is the most reliable and trustworthy.” — IRS Cost Segregation Audit Techniques Guide (Publication 5653, rev. 2-2025), Chapter 4, C.3
Frequently Asked Questions
What documents do I need for a cost segregation study on a contractor-built property?
For a property built or renovated by a general contractor, a cost segregation study is built mainly from the AIA G702/G703 pay applications or invoices that list actual cost by trade, the construction drawings and, for a property already on your books, the trial balance; property photos complete the file, and for a purchased building the documents needed before filing adds the closing statement, the land-value source and the depreciation schedule.
Can I order a cost segregation study without AIA pay applications?
Yes: contractor invoices, job cards, sworn statements and draw requests work as substitutes for AIA G702/G703 pay applications in a cost segregation study when they itemize the actual cost paid per trade, and they belong in the same upload category.
Why does a trial balance take precedence in a cost segregation study?
When a trial balance is uploaded, its account balances establish how much has been capitalized in each category (land, land improvements, buildings and building improvements), so it takes precedence over every other cost source for the total depreciable basis, and the construction documents are used to split the building basis into recovery periods.
Does a cost segregation study include a site visit?
A ClickDrag Finance cost segregation study can include a site visit, by appointment, and a visit is preferred; when a site visit is not feasible because of cost or timing, the property is documented from its own records and from photographs linked to the components they support, and each photograph’s embedded date and location data are read and recorded. The photos you upload, or take by following the guided photo checklist, are part of that record.
Why does the land allocation on the closing statement matter for depreciation?
Land is never depreciable, so the land-versus-building allocation on the closing statement sets how much of the purchase price is depreciable basis, which is the amount a cost segregation study can reclassify into shorter recovery periods.
