Property Overview
This case study focuses on a vacation rental property acquired in May 2023 for $1,123,653 (excluding land). The cost segregation study was applied to the 2023 tax year, with a 37% tax rate and an 8% present value rate of return.
The property benefited from 80% bonus depreciation, allowing the owner to accelerate deductions and reduce taxable income. By reallocating property components into shorter depreciation periods, the study helped maximize financial benefits and improve cash flow.
| Property Type | Short-Term Rental |
| Purchase price(less land) | $1,123,653 |
| Building sqft | – |
| Entire site sqft | – |
| Data acquired | May 2023 |
| Tax year study applied | 2023 |
| Tax rate | 37.0% |
| Present value rate of return | 8% |
| Bonus depreciation | 80% |
Building Allocation After Study
Cost Segregation Study Benefits
Through a cost segregation study, the vacation rental property achieved a first-year tax savings of $59,666, with a cumulative net present value (NPV) benefit of $43,065. When reinvested, these savings equate to a future value of $866,261.
The study reclassified building assets into accelerated depreciation categories, with $168,548 allocated to 5-year property, $29,215 to 15-year property, and $925,890 to 27.5-year property. These strategic reclassifications allowed the property owner to take advantage of front-loaded deductions, enhancing long-term profitability.
Financial Benefits Achieved
| Immediate Tax Savings | $59,666 |
| NPV Over 10 Years | – |
| NPV Over Remaining Life of Property | $43,065 |
| Future Value of Invested Savings | $866,261 |