Highlands – Cashiers is a gorgeous area in the Blue Ridge mountains of western North Carolina. It has a high-end, luxury, exclusive feel with its many great shops, restaurants and houses. It’s a great get-a-way destination for many to head to the mountains to escape the heat found in other parts of North and South Carolina. We visited this past weekend during the 4th of July. There were lots of people but we were able to find parking reasonably quickly.
If you own a short-term rental, vacation home, Airbnb, VRBO property in the Highland – Cashiers area, you are highly likely making money on your property. If you have not taken advantage of the tax savings offered by applying cost segregation, we should take a look at your property.
We study lots of short-term rentals including luxury rentals like those found in the Highlands and Cashiers area of North Carolina.
If you’re not sure how it works, here’s some simple math. The formula works whether you have a $300,000 property or a $3,000,000 property. The cost of the study will vary of course but the results end up pretty similar just scaled to the cost basis for each property. But let’s say you paid $1.3MM for a house and the land value is $300,000. You deduct the $300k because land is not depreciable. That leaves you with $1MM in cost basis. By doing cost segregation, we will reclassify all the components in the building including any land improvements. Property will be broken into 5, 15 and 39 year lives. With the tax law, any property with a class life of 20 years or less may be eligible for 100% bonus depreciation. We are likely to reclassify 20-30% of that $1MM giving you a $200,000 – $300,000 depreciation deduction year 1. If you are paying 32, 35, 37% federal tax, that’s a tax savings of $60,000 – $100,000.
We always recommend owners discuss with their tax advisors to be sure they can take advantage of the increased accumulated depreciation generated by our engineering-based cost segregation studies. There are some specific hurdles you need to hit to be able to use this depreciation against your active income instead of just have it hit your passive income line.
I’m based in Greenville, SC but work all across the U.S. I’m always open to a phone call if you’d like to discuss. Even if you are considering buying a property in Highlands – Cashiers feel free to call to get a better understanding of this. Cost segregation is material to a transaction and should be considered and factored in to your pro-forma. I do not charge you for the phone call. We only charge a fee once we are engaged on doing a study. We’ll run estimates for your properties and there’s no charge for us to do that. I find it best that instead of guessing what your numbers might be, that owners have an actual estimate in their hands in the form of a PDF that they can review and discuss the specifics with their own tax advisor.
Studies need to be completed before you file your tax return. They don’t need to be done by year-end. So if you put an STR into service in 2026, you have until you file your 2026 taxes to get a study completed. I think it’s best to get them done sooner than later so you have your numbers well in advance of year end for tax planning. But if you are reading this at a later date say in February or March of 2027 and you want to study a property placed into service in 2026, we absolutey can do that. Also, about 35-40% of our studies each year are for properties that were placed into service a few years ago. Those also can be studied. There will be some additional accounting cost as you’ll need to file an IRS form 3115 – Application for Change in Accounting.
Here’s a helpful link if you are looking at visiting the Highlands – Cashiers area in North Carolina.
