Cost Segregation Analysis for a Residential Property in Tahoe Vista, California

Narrative

In 2024, the owners of a two-story residential property in Tahoe Vista, California engaged in strategic tax planning to enhance their investment. Originally constructed in 1981, this single-family home was purchased for $1,800,000 with a land value of $318,600 and a depreciable basis of $1,481,400.

The property features modern amenities including a comprehensive HVAC system, custom cabinetry, high-end appliances, and various electrical and plumbing systems. The exterior includes wood siding, asphalt shingle roofing, and decorative elements. Interior finishes comprise ceramic tile, carpeting, and custom lighting fixtures.

Objective

The primary goal of the cost segregation study was to identify and reclassify building components into shorter depreciation life categories, thereby accelerating depreciation deductions and optimizing tax benefits for the property owners.

Methodology

ETS employed a detailed, engineering-based approach, which included:

1. Physical Inspection: conducting a thorough site visit to identify and photograph the property's components
2. Document Review: examining architectural plans, construction documents and accounting records
3. Cost Analysis: applying engineering principles to allocate costs to specific asset classifications
4. Depreciation Calculation: calculating depreciation using IRS-accepted methods such as the Modified Accelerated Cost Recovery System (MACRS)

Asset Allocation