From the founder

It did exactly what it was designed to do

People treat cost segregation like something you got away with. It is the opposite. It is a lever Congress built on purpose, and I have watched it work from inside the house.

Bola Akinsanya · Founder, Unlevered· July 16, 2026

There is a story people tell about cost segregation where it is something you got away with. A gap in the rules that someone clever found. I understand why it sounds that way. A large deduction in year one, against real income, from a house you still own and still rent out. If you did not know the reason it exists, you would assume it was an accident the government forgot to close.

It is not an accident. It is the point.

Depreciation has been in the U.S. tax code for more than a century, and the logic behind it has never changed. When a business puts an asset to work, the code lets it recover the cost of that asset over time, because the asset wears out while it earns. Cost segregation just does the recovery honestly. Instead of pretending a whole building ages at one slow rate, it separates the things that genuinely break down faster, the appliances, the flooring, the landscaping, the fixtures, from the structure that does not. The IRS formally accepted the method in 1999. Bonus depreciation, which lets you take a chunk of that recovery immediately, arrived in 2002 at 30 percent. In 2017 it went to 100 percent. And in 2025 the 100 percent version was made permanent for property placed in service after January 19. None of that is a gap someone found. It is a lever, and Congress has been reaching for it for twenty years.

The reason they reach for it is behavioral, and it is almost embarrassingly simple. If you know you can get the money back, you are far more likely to spend it. Timing is the whole game. A deduction today is worth more than the same deduction spread across the next forty years, because of cash flow, because of the time value of money, because inflation eats the later dollars, and because a lower after-tax cost means more projects clear the bar and actually get built. Move the recovery forward and you change what a person decides to do this year. That is the entire mechanism. Reward the investment at the exact moment the investment is made.

Here is where I stop talking about the code and tell you what it actually looks like, because I have lived on the other end of this lever.

When I buy a rental and get it ready, I do not spend that money in a vacuum. I have a cleaner I pay somewhere between fifteen and twenty thousand dollars a year to run turnovers. I have a handyman I call the day something breaks, and I pay him, and then we talk through what he wants to fix next. There are contractors installing floors, hanging lights, rebuilding a deck. At my Sea Ranch house there is a groundskeeper. There is a chimney sweep who comes through. Every one of those is a person earning a living because I decided the after-tax math on fixing up this house finally worked. And that is before a single guest arrives. When they do, they are not sitting in the house the whole time. They are eating dinner at the Sea Ranch Lodge, they are buying oysters and provisions around Marion, they are spending in a town that does not otherwise get their attention. One house turns into a small, steady payroll for a dozen people and a stream of spending into a local economy. That is not a side effect of the deduction. That is the deduction doing its job.

Now zoom out, because the same thing happens at scale, and the numbers are on the record. When the after-tax math improves for thousands of buyers at once, supply follows. U.S. short-term-rental revenue went from about thirty-nine billion dollars in 2019 to sixty-four billion in 2023, with a forecast around seventy-eight billion for 2024. It more than doubled in five years, and it concentrated in exactly the years the 100 percent bonus window was open.

By 2023 there were roughly 2.4 million short-term rentals in the country, about 785,000 individual hosts, and 207 million nights stayed. Supply growth peaked at over 22 percent in 2022, the tail of that window, and then normalized as the rate phased down. Those figures are AirDNA’s, not mine. But you can see the shape of the incentive in them. Congress lowered the after-tax cost of buying and improving property, investors ran the math, and a multi-billion-dollar market grew up around the rule, house by house, cleaner by cleaner, handyman by handyman.

I want to be careful here, because this is where it would be easy to oversell. Correlation is not the whole story, and a hundred things drove that boom, not one line in the tax code. The deduction only helps if you have real income to use it against, and if your situation qualifies, either through short-term rental treatment or real estate professional status. The hours you put in have to be real hours. The structure itself, the framing and the foundation and the roof, still depreciates on the long schedule, because it genuinely does last. Year one is the big one and year two is smaller. And your state may treat any of this differently than the federal code does. This is a strategy with conditions, not a button.

But strip all of that away and the core of it is clean. This is not a preparer failing to catch something, and it is not something you slipped past anyone. Most CPAs are trained to file what you hand them, correctly, which is a different skill than identifying and structuring this in the first place. That is a specialty gap, not a character flaw, and it is most of the reason people think this is exotic when it is not.

The tax code wanted capital put to work. It made it cheaper, after tax, to buy a house and fix it up and put it into service. So people did, and paid the cleaner, and fed the town, and the market answered. The lever did exactly what it was designed to do. My whole job now is to make sure the people it was built for can actually reach it.

This is a founder’s explanation of why the incentive exists, not tax advice. The wheel figures are one host’s real vendor numbers and are illustrative; the market figures are AirDNA’s. A deduction lowers taxable income and is not a refund, and whether any of it applies to you depends on qualification under the passive activity rules, real hours, and your state’s treatment. Talk to your own tax professional. See our full disclaimer.