32 Hale Kai Place, Kihei, HI 96753
| Property type | Short-Term Rental · Single-Family Residence |
|---|---|
| Year built | 1998 |
| Square feet | 1,650 |
| Beds | 3 |
| Baths | 2 |
| Lot size | 8,200 sqft |
| Parcel | 2-3-9-012-045-0000 |
Executive summary
This study reclassifies a portion of the property's depreciable basis from 27.5-year residential into shorter recovery periods, accelerating deductions into year one under current bonus depreciation rules.
| Tax year | Detail | Deduction | Cumulative |
|---|---|---|---|
| Year 1 | FY 2025 · Short-life + shell (partial) | $243,934 | $243,934 |
| Year 2 | FY 2026 · 27.5-yr shell | $17,420 | $261,354 |
| Year 3 | FY 2027 · 27.5-yr shell | $17,420 | $278,774 |
| Year 4 | FY 2028 · 27.5-yr shell | $17,420 | $296,194 |
| Year 5 | FY 2029 · 27.5-yr shell | $17,420 | $313,614 |
| Total over 5 years | $313,614 | ||
Short-life property is deducted in full now; only the 27.5-year shell spreads forward.
How the asset depreciates
This year's deduction comes from reclassifying short-life property out of the building basis: the 5- and 15-year components take bonus depreciation now, and the rest depreciates on the regular schedule.
Component allocation
$235,950 of short-life property. The rollup below organizes it by recovery period, then by room, then down to each component and its verified source.
Recovery bucket → room → component line item.
5-year personal property$178,750
Property-wide$178,752
| Appliances & FF&E | ||
| Carpet and flooring (non-permanent) | $29,792 | Archetype |
| Window treatments | $29,792 | Archetype |
| Cabinetry (non-permanent) | $29,792 | Archetype |
| Appliances | $29,792 | Archetype |
| Decorative lighting | $29,792 | Archetype |
| Linens and decor (non-permanent) | $29,792 | Archetype |
15-year land improvements$57,200
Property-wide$57,201
| Site & land improvements | ||
| Driveway and walkways | $19,067 | Archetype |
| Landscaping (depreciable) | $19,067 | Archetype |
| Fencing | $19,067 | Archetype |
27.5-year residential shell$479,050
Property-wide$479,050
| Structure & envelope | ||
| Residential rental building | $479,050 | Archetype |
How the state diverges
Federal bonus depreciation isn't always allowed at the state level. Where a state decouples, the federal bonus is added back and the asset is recovered on the state's own schedule — producing a separate state deduction stream and a basis that diverges from federal through sale.
Hawaii decouples from §168(k) (HRS §235-2.4). Federal bonus is added back and the asset recovered under regular MACRS over its class life. Federal bonus added back, depreciation recomputed under regular MACRS · HI Form N-11 adjustment.
| Tax year | Add-back | Subtraction |
|---|---|---|
| Year 1 | $197,340 | — |
| Year 2 | — | $62,634 |
| Year 3 | — | $39,211 |
| Year 4 | — | $24,996 |
| Year 5 | — | $24,556 |
| Year 6 | — | $13,860 |
Year-one add-back of $197,340 is recovered over the asset lives; the federal bonus and the state schedule recover the same basis, so the adjustments net to zero across the full horizon.
| Tax year | State deduction | Cumulative |
|---|---|---|
| Year 1 | $46,594 | $46,594 |
| Year 2 | $80,054 | $126,648 |
| Year 3 | $56,631 | $183,279 |
| Year 4 | $42,416 | $225,695 |
| Year 5 | $41,976 | $267,671 |
| Year 6 | $31,280 | $298,951 |
| Total over 29 years | $715,003 |
| Tax year | Federal basis | HI basis | Divergence |
|---|---|---|---|
| Year 1 | $471,066 | $668,406 | $197,340 |
| Year 5 | $401,386 | $447,329 | $45,943 |
| Year 10 | $314,286 | $332,865 | $18,579 |
HI carries more basis forward — federal front-loads depreciation via bonus, so a sale before full recovery shows a larger federal gain than HI.
Verified sources
Every figure traces to a primary source. This is the provenance behind the engineered review: what we relied on, what it established, and how we confirmed it.
| Source | What it verified | How | Status |
|---|---|---|---|
| County assessor record | Land vs. improvement allocation | Public parcel record · 2-3-9-012-045-0000 | Verified |
| IRS authorities | Classification & recovery periods | Cross-referenced per component | Verified |
Methodology calibrated to IRS standards
Component allocations follow the IRS Cost Segregation Audit Techniques Guide and MACRS recovery periods. Every assumption traces to a publicly cited authority.
The figures above are fixed by these study-specific inputs: the bonus rate is set by the placed-in-service year, and the disposition is a taxpayer election. They carry through the entire study.
| Tax year of filing | 2025 MACRS recovery periods, conventions, and the bonus rate are applied as in effect for this filing year. |
|---|---|
| First-year bonus rate | 100% IRC §168(k) first-year bonus depreciation. The rate is fixed by the placed-in-service date (Jul 1, 2025) and steps down by year, so it is specific to this property. |
| Land allocation | $385,000 Land is non-depreciable and excluded from the reclassified basis. |
| MACRS conventions | Mid-month / half-year The 27.5-year shell uses the mid-month convention; 5- and 15-year property uses the half-year (or mid-quarter) convention per IRS Pub. 946. |
| Authority | How it applies to this study |
|---|---|
| STATUTE IRC §167 | IRC §167 |
| STATUTE IRC §168 | IRC §168 |
| REV_PROC Rev. Proc. 87-56 | Rev. Proc. 87-56, 1987-2 C.B. 674 |
| ATG Cost Seg ATG | IRS Cost Segregation Audit Technique Guide (revised 2017) |
| CASE Whiteco | Whiteco Industries Inc. v. Commissioner, 65 T.C. 664 (1975) |
| CASE HCA | Hospital Corp. of America v. Commissioner, 109 T.C. 21 (1997), acq. 2000-2 C.B. xvi |
| REV_RUL Rev. Rul. 2003-81 | Rev. Rul. 2003-81, 2003-2 C.B. 126 |
| REG Treas. Reg. §1.167(a)-1 | Treas. Reg. §1.167(a)-1 |
Engineered review pass
Every study runs through the same four-stage engineered review before release: produced by the cost segregation engine, independently re-computed, and cross-checked against IRS authorities and public records.
Source ingestion
Source facts and citations verified at intake.
Component classification
Components mapped to MACRS class lives per Rev. Proc. 87-56 + IRS ATG.
Reconciliation
Allocation sum reconciled to depreciable basis within tolerance.
Compliance check
Bonus eligibility, anti-churning, and completeness validated.
AI engineering review
An AI engineer paired with an IRS audit agent reviews and verifies every study so the calculations are defensible and traceable to tax-law standards.
Independent re-computation
Allocations re-run by a second model and reconciled.
IRS-authority cross-check
Each component mapped to the IRS ATG, Rev. Proc. 87-56, and MACRS class lives.
Audit trail retained
Every source document and the full run log are retained for the audit-defense window.