Cost segregation case study · Short-term rental
Hale Kai Cottage
Purchase price
$1.1M
Depreciable basis
$715K
Year-one deduction
$244K
Where the cash went
$1.1M in, split into land and building
The property was bought for $1,100,000. Land never depreciates, so it's carved out first; the building basis becomes the depreciable pool the study then accelerates.
Where the $1.1M went
Every dollar in, by where it landed. Land never depreciates; the building basis is what the study accelerates.
$1.1Mtotal spend
Land (never depreciates)$385,000 · 35%
Building basis (from purchase)$715,000 · 65%
Building $715,000 = $715,000 depreciable basis.
Inside the study
What the engine found
The deterministic engine separated the $715,000 depreciable basis into IRS recovery classes, then the engineered review confirmed every component against the source documents.
Component allocation
$715,000 depreciable basis across MACRS recovery classes.
$715Kbasis
5-year personal property$178,750 · 25%
15-year land improvements$57,200 · 8%
27.5-year building shell$479,050 · 67%
Residential rental building $479KCarpet and flooring (non-pe… $30KWindow treatments $30KCabinetry (non-permanent) $30KAppliances $30KDecorative lighting $30KLinens and decor (non-perma… $30KDriveway and walkways $19K
Year one, in dollars
Accelerated depreciation, taken in year one.
| Accelerated depreciation | $243,934 |
| Total year-one deduction | $243,934 |
| Straight-line without a study | ~$26,000/yr |
About 9× more deduction pulled into year one than straight-line.
Depreciation by year
Year-one spike from bonus depreciation, then the building shell.
| Year 1 | $243,934 |
| Year 2 | $17,420 |
| Year 3 | $17,420 |
| Year 4 | $17,420 |
| Year 5 | $17,420 |
Method. Allocations follow the IRS Cost Segregation Audit Techniques Guide, Rev. Proc. 87-56, and MACRS (Pub. 946), with the 100% bonus rate (placed in service 2025) applied to qualifying 5- and 15-year property. The engine produces the figures deterministically; AI is used only to sort and extract from uploaded documents. Every line cleared the engineered review.
Run on Unlevered · engineered review · ULV-2025-E6DC