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Cost Segregation Study · Tax Year 2025
14 Converse Rd
Marion, MA, 02738
| Property type | Short-Term Rental · Single-Family Residence |
|---|---|
| Year built | 1928 |
| Square feet | 852 |
Section 01
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.
Total deduction
USD545,873
$322,321 is deductible in year one: $199,976 of first-year depreciation plus a $122,345 partial-asset disposition write-off. The balance of the reclassified depreciation comes through over the rest of the schedule.
Total basis
$906,964
Land allocation
$361,092
Depreciable basis
$545,873
Short-life reclass
$193,350
Without cost seg
$12,406
Straight-line, 27.5-yr, partial year one
With this study
$322,321
26× larger first-year deduction
Deduction ledger
| Tax year | Detail | Deduction | Cumulative |
|---|---|---|---|
| Year 1 | FY 2025 · Disposition + short-life + shell (partial) | $322,321 | $322,321 |
| Year 2 | FY 2026 · 27.5-yr shell | $8,370 | $330,691 |
| Year 3 | FY 2027 · 27.5-yr shell | $8,370 | $339,061 |
| Year 4 | FY 2028 · 27.5-yr shell | $8,370 | $347,431 |
| Year 5 | FY 2029 · 27.5-yr shell | $8,370 | $355,801 |
| Total over 5 years | $355,801 | ||
Short-life property is deducted in full now; only the 27.5-year shell spreads forward.
Section 02
How the asset depreciates
This year's deduction combines the remodel with the property's reclassified basis. On the remodel, the removed components are written off and the new build is depreciated.
Disposition write-off
$122,345 38%
Remaining tax basis of the components removed in the remodel, deducted in full this year as a partial asset disposition (Treas. Reg. §1.168(i)-8).
Bonus depreciation
$193,350 60%
100% first-year bonus on the property reclassified to 5- and 15-year recovery.
First-year MACRS depreciation
$6,626 2%
Regular first-year depreciation on the remaining basis, including the 27.5-year shell (mid-month, partial year).
The remodel, in numbers: disposition and replacement
Each remodeled area: the remaining undepreciated basis written off as a partial asset disposition (Treas. Reg. §1.168(i)-8), and the new capitalized replacement. Expand any row for the substantiating detail.
Remodeled areaDisposedReplacementNew total
Building systems (property-wide)$75,446$80,716$156,162
Original flooring: carpet, vinyl, and subfloor underlayment (fully replaced)$14,274$8,336$22,610
Original drywall, paint, and baseboards: structural wall substrate (property-wide strip)$14,274$14,500$28,774
Original plumbing rough-in: supply and drain piping (bathrooms and kitchen)$12,235$8,305$20,540
Original electrical rough-in: wiring, outlets, switches (bathrooms and kitchen rewired)$10,195$3,661$13,856
Original HVAC ducts and registers (rerouted during structural work)$8,156$28,000$36,156
Original ceiling finishes and insulation (penetrated for skylights and wall moves)$6,117property-wide$6,117
Original interior partition framing (walls removed or relocated)$6,117$17,500$23,617
Original interior doors and hardware (replaced throughout)$4,078$414$4,492
Other scope$2,039$33,536$35,575
Ceiling (exposed wood beams and sheathing)$2,039property-wide$2,039
Landscape plantings (ornamental shrubs and perennials)$0$0$0
Other remodel scope: room not specified$0$33,536$33,536
Kitchen$16,313$714$17,027
Windows (interior-facing, multiple panes)$16,313$714$17,027
Bathrooms$10,195property-wide$10,195
Toilet fixture$10,195property-wide$10,195
Living / dining$8,156property-wide$8,156
Aluminum-frame windows$8,156property-wide$8,156
Exterior & grounds$6,117property-wide$6,117
Exterior deck/patio structure$6,117property-wide$6,117
Bedrooms$4,078property-wide$4,078
Flooring (area rug)$4,078property-wide$4,078
Remodel total · year-one$122,344$114,966$237,310
“property-wide” marks an area whose replacement spend is itemized across Building systems and Other scope above, not at the room level: the remodel receipts were recorded by trade rather than by room, so the new capitalized spend for that area is captured in those property-wide totals, not absent.
Section 03
Component allocation
$193,350 of short-life property. The rollup below organizes it by recovery period, then by room, then down to each component and its verified source.
Allocation rollup
Recovery bucket → room → component line item.
5-year personal property$173,806
Property-wide$50,745
| Appliances & FF&E | ||
| Cabinet & door hardware (knobs, pulls) | $3,292 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#3 |
| Furniture delivery & moving (Michaels) | $2,055 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#11 |
| Window treatments: curtains, blinds, shades | $3,200 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#14 |
| Carpet and flooring (non-permanent) | $3,398 | Archetype |
| Window treatments | $3,398 | Archetype |
| Cabinetry (non-permanent) | $3,398 | Archetype |
| Appliances | $3,398 | Archetype |
| Decorative lighting | $3,398 | Archetype |
| Linens and decor (non-permanent) | $3,398 | Archetype |
| Soft costs | ||
| Structural engineer (§263A allocated → 5-yr) | $267 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#29 |
| Tile handling/moving (§263A allocated → 5-yr) | $41 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#30 |
| On-ground operations: furniture assembly, unpack/repack (§263A allocated → 5-yr) | $2,052 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#35 |
| Project management (§263A allocated → 5-yr) | $10,763 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#36 |
| Portable toilet: construction (§263A allocated → 5-yr) | $108 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#37 |
| Architect (§263A allocated → 5-yr) | $2,052 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#38 |
| Electrical | ||
| Decorative lighting: lamps & portable fixtures | $6,527 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#2 |
Kitchen$48,801
| Appliances & FF&E | ||
| Kitchen appliances | $26,301 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#1 |
| Kitchen operations: cookware, dishware, small appliances | $15,000 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#8 |
| Kitchen cabinetry: built-in | $7,500 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#24 |
Living / Dining$22,489
| Appliances & FF&E | ||
| Living room furniture | $18,269 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#4 |
| Kitchen & dining furniture | $4,220 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#9 |
Outdoor$8,586
| Appliances & FF&E | ||
| Outdoor furniture | $8,586 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#10 |
Primary Bedroom$18,209
| Appliances & FF&E | ||
| Primary bedroom furniture | $10,000 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#6 |
| Primary bedroom furnishings | $8,209 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#13 |
Kids Room$11,321
| Appliances & FF&E | ||
| Kids room furniture | $10,000 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#7 |
| Kids bedroom furnishings | $1,321 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#12 |
Bathroom$8,185
| Appliances & FF&E | ||
| Bathroom furnishings & decor | $8,185 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#0 |
Sunroom$5,468
| Appliances & FF&E | ||
| Sunroom furniture | $5,468 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#5 |
15-year land improvements$19,543
Property-wide$8,244
| Site & land improvements | ||
| Driveway and walkways | $2,175 | Archetype |
| Landscaping (depreciable) | $2,175 | Archetype |
| Fencing | $2,175 | Archetype |
| Soft costs | ||
| Structural engineer (§263A allocated → 15-yr) | $30 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#29 |
| Tile handling/moving (§263A allocated → 15-yr) | $5 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#30 |
| On-ground operations: furniture assembly, unpack/repack (§263A allocated → 15-yr) | $231 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#35 |
| Project management (§263A allocated → 15-yr) | $1,210 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#36 |
| Portable toilet: construction (§263A allocated → 15-yr) | $12 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#37 |
| Architect (§263A allocated → 15-yr) | $231 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#38 |
Outdoor$11,300
| Site & land improvements | ||
| Landscaping: plantings & beds | $10,500 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#15 |
| Deck repair | $800 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#16 |
27.5-year residential shell$230,178
Property-wide$227,675
| Structure & envelope | ||
| Demolition (capitalized into improvements) | $35,000 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#17 |
| Carpentry: framing & structural | $17,000 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#18 |
| Construction dumpster & debris removal | $4,000 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#26 |
| Roof repair | $1,150 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#28 |
| Additional framing | $7,000 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#34 |
| Residential rental building | $54,647 | Archetype |
| Interior finishes | ||
| Interior painting | $8,500 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#19 |
| Flooring: material + installation | $9,855 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#20 |
| Interior doors | $1,930 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#25 |
| Ceiling: structure, insulation, finish | $11,500 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#32 |
| Tile: material + installation | $8,056 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#33 |
| HVAC / Mechanical | ||
| HVAC system: furnace, AC, ductwork | $28,000 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#21 |
| Soft costs | ||
| Structural engineer (§263A allocated → 27.5-yr) | $353 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#29 |
| Tile handling/moving (§263A allocated → 27.5-yr) | $54 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#30 |
| On-ground operations: furniture assembly, unpack/repack (§263A allocated → 27.5-yr) | $2,717 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#35 |
| Project management (§263A allocated → 27.5-yr) | $14,253 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#36 |
| Portable toilet: construction (§263A allocated → 27.5-yr) | $143 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#37 |
| Architect (§263A allocated → 27.5-yr) | $2,717 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#38 |
| Electrical | ||
| Electrical: panel, wiring, devices | $10,500 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#23 |
| Fixed/stable lighting | $300 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#27 |
| Plumbing | ||
| Plumbing: rough + fixtures | $10,000 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#31 |
Bathroom$2,500
| Plumbing | ||
| Shower enclosure | $2,500 | doc:83645221-2634-4f08-8e00-50fe09c7e7e5#22 |
State conformity
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.
Massachusetts (MA)Draft · pending CPA verification
Massachusetts decouples from §168(k) (M.G.L. c.62 §2). Federal bonus is added back and depreciation recomputed under regular MACRS on the Schedule E adjustment. Federal bonus added back, depreciation recomputed under regular MACRS · MA Schedule E adjustment.
State adjustment · the figures you transcribe onto the return
| Tax year | Add-back | Subtraction |
|---|---|---|
| Year 1 | $159,006 | — |
| Year 2 | — | $57,475 |
| Year 3 | — | $35,042 |
| Year 4 | — | $21,527 |
| Year 5 | — | $21,377 |
| Year 6 | — | $11,229 |
Year-one add-back of $159,006 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.
State depreciation schedule
| Tax year | State deduction | Cumulative |
|---|---|---|
| Year 1 | $40,970 | $40,970 |
| Year 2 | $65,845 | $106,815 |
| Year 3 | $43,412 | $150,227 |
| Year 4 | $29,897 | $180,124 |
| Year 5 | $29,747 | $209,871 |
| Year 6 | $19,599 | $229,470 |
| Total over 28 years | $423,526 |
Dual basis · federal vs MA remaining basis
| Tax year | Federal basis | MA basis | Divergence |
|---|---|---|---|
| Year 1 | $223,551 | $382,558 | $159,006 |
| Year 5 | $190,071 | $213,657 | $23,586 |
| Year 10 | $148,221 | $155,963 | $7,743 |
MA carries more basis forward — federal front-loads depreciation via bonus, so a sale before full recovery shows a larger federal gain than MA.
Section 04
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 |
|---|---|---|---|
| Closing statement | Purchase price & cost basis | Client-uploaded; reconciled to settlement line items | Verified |
| Contractor invoices | Component costs & quantities | Client-uploaded receipts, reconciled to scope | Verified |
| Client photographs (35) | Existence & condition of reclassified assets | Engineer review | Verified |
| IRS authorities | Classification & recovery periods | Cross-referenced per component | Verified |
| CPA-provided facts | purchase price, capital improvements cents, land allocation %, acquisition date, placed-in-service date, unit count, +3 more | Entered by your CPA on your behalf and logged to the audit trail | Verified |
Remodel, before and after
The remodel scope, documented. These photos support the disposition and replacement detailed in Section 02.
Interior window treatments (roller shades)
Before
After
Wall finish (painted drywall)
Before
After
Kitchen
Before
After
Handheld shower wand with slide bar
Before
After
Pendant ceiling light fixture
Before
After
Interior windows/glass doors
Before
After
Photographic evidence
Client photos cross-referenced against component allocations. Each asset is tied to its MACRS classification and the permit or invoice that supports it.
5-YR PERSONAL
- Vanity cabinetry with sink5-YR PERSONAL
- Toilet fixture27.5-YR SHELL
- Faucet with black finish27.5-YR SHELL
- Shower enclosure with green tile27.5-YR SHELL
- Shower door frame and glass27.5-YR SHELL
- Wall finish and paint27.5-YR SHELL
AI vision · auto-applied
5-YR PERSONAL
- Bathroom vanity lighting5-YR PERSONAL
- Wall-mounted mirror5-YR PERSONAL
- Wall tile (bathroom)27.5-YR SHELL
- Toilet27.5-YR SHELL
- Flooring (vinyl or engineered wood)27.5-YR SHELL
- Vessel sink27.5-YR SHELL
AI vision · auto-applied
5-YR PERSONAL
- Built-in kitchen cabinetry (green/white)5-YR PERSONAL
- Kitchen countertop (wood)5-YR PERSONAL
- Pendant lighting (multi-globe fixture)5-YR PERSONAL
- Windows (interior-facing, multiple panes)27.5-YR SHELL
- Ceiling (exposed wood beams and sheathing)27.5-YR SHELL
- Wall finish (textured drywall/plaster)27.5-YR SHELL
AI vision · auto-applied
5-YR PERSONAL
- Built-in kitchen cabinetry5-YR PERSONAL
- Patterned wall finish27.5-YR SHELL
- Kitchen sink and faucet27.5-YR SHELL
- Wood countertop27.5-YR SHELL
- Wood ceiling27.5-YR SHELL
- Window frames and trim (interior)27.5-YR SHELL
AI vision · admin-reviewed
5-YR PERSONAL
- Outdoor furniture (Adirondack chairs)5-YR PERSONAL
- Exterior deck/patio structure15-YR LAND IMP.
- Landscape plantings (ornamental shrubs and perennials)15-YR LAND IMP.
- Exterior siding27.5-YR SHELL
- Exterior windows27.5-YR SHELL
AI vision · auto-applied
5-YR PERSONAL
- Pendant lighting fixture5-YR PERSONAL
- Interior window treatments (roller shades)5-YR PERSONAL
- Aluminum-frame windows27.5-YR SHELL
- Wall finish and drywall27.5-YR SHELL
- Interior passage door27.5-YR SHELL
- Exposed wood ceiling27.5-YR SHELL
AI vision · admin-reviewed
27.5-YR SHELL
- Hardwood flooring27.5-YR SHELL
- Interior doors and frames27.5-YR SHELL
- Wall finish and paint27.5-YR SHELL
- Electrical lighting (ceiling fixtures)27.5-YR SHELL
- Exposed wood beam ceiling27.5-YR SHELL
AI vision · admin-reviewed
5-YR PERSONAL
- Natural fiber area rug5-YR PERSONAL
- Pendant ceiling light fixture5-YR PERSONAL
- Wood windows (exterior frame)27.5-YR SHELL
- White shiplap wall finish27.5-YR SHELL
- Shiplap ceiling27.5-YR SHELL
- Wood flooring27.5-YR SHELL
AI vision · admin-reviewed
5-YR PERSONAL
- Washer/Dryer stacked unit5-YR PERSONAL
- Built-in shelving5-YR PERSONAL
- Interior door (cream/beige)27.5-YR SHELL
- Flooring (dark tile/vinyl)27.5-YR SHELL
- Ceiling-mounted smoke/fire detector27.5-YR SHELL
- Electrical outlets and switch plates27.5-YR SHELL
AI vision · admin-reviewed
5-YR PERSONAL
- Ceiling-mounted flush fixture5-YR PERSONAL
- Decorative wall sconce5-YR PERSONAL
- Wood-framed windows with muntins27.5-YR SHELL
- Shiplap wall finish27.5-YR SHELL
- Hardwood flooring27.5-YR SHELL
AI vision · admin-reviewed
27.5-YR SHELL
- Interior doors and frames27.5-YR SHELL
- Recessed ceiling lighting fixture27.5-YR SHELL
- Wall finish (drywall and paint)27.5-YR SHELL
- Flooring (dark hardwood/tile)27.5-YR SHELL
AI vision · admin-reviewed
Section 05
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.
Key parameters & assumptions
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 (May 15, 2025) and steps down by year, so it is specific to this property. |
| Partial asset disposition | Elected · §1.168(i)-8 Remaining basis of the components removed in the remodel is written off this year. Requires the original component basis and the removal/placed-in-service dates. It is a per-component election, not automatic. |
| Land allocation | $361,092 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. |
Authorities
| 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 |
Section 06
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.
01
Source ingestion
Source facts and citations verified at intake.
02
Component classification
Components mapped to MACRS class lives per Rev. Proc. 87-56 + IRS ATG.
03
Reconciliation
Allocation sum reconciled to depreciable basis within tolerance.
04
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.
About this review. Component allocations are cross-validated against IRS authorities, assessor records, and the client's source documents during the preparation workflow. Bola's Tax Co. retains sole professional responsibility for the tax positions reported on the return, reviews the underlying support, and signs the return as the paid preparer. The software facilitates substantiation and calculation; it does not replace the firm's professional judgment or filing responsibility.