CASE STUDY

120-Room Hotel

Denver Metro Area, CO

Highlights

In 2022, a seasoned hotel investor acquired a 120-room hotel in the Denver metro area with a cost basis of $13.6 million. Under straight-line depreciation, they would have only written off $348,849 in year one. Instead, our team applied IRS Approach #2—the Detailed Engineering Cost Estimate Approach—to leverage 100% Bonus Depreciation and accelerate $5,276,412 into their first-year tax return—unlocking 37% of the property’s value immediately.

By accelerating over 37% of the property’s value, we transformed long-term depreciation into immediate cash flow—fueling reinvestment and driving returns across their expanding portfolio. With over 30 properties studied by our team, this investor continues to rely on Cost Seg America as a trusted partner and essential part of their long-term strategy.

Statistics

$13,605,107

Cost Basis

$348,849

First-Year Depreciation (Straight-Line)

$5,276,412

First-Year Depreciation (Cost Seg + 100% Bonus)

$5,057,236

Total Accelerated Depreciation

37%

Depreciation Accelerated

Approach

Cost Seg America used the IRS’s Approach 2 — the Detailed Engineering Cost Estimate Approach outlined in the IRS Cost Segregation Audit Technique Guide — to accurately classify assets and maximize allowable depreciation.

‍Breakdown of Reclassified Assets:

Comprehensive Data Collection – Our team gathers all relevant documents, including settlement statements, site plans, and architectural drawings, to create a complete asset profile.
On-Site Inspection – Our analysts conduct a detailed inspection to identify every critical component of the property.
Precise Asset Reclassification – Our team categorizes property components according to IRS guideline, ensuring compliance while accelerating depreciation schedules.
Optimized Depreciation Application – Our team's analysts apply MACRS to maximize tax deferrals and enhance cash flow.
Seamless CPA Collaboration – Our cost segregation report is delivered audit-ready, ensuring smooth integration into tax filings with full IRS defense.

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‍💡 How This Property Was Reclassified

🟦 39-Year Property: $8,547,871 (63%)

🟩 15-Year Property: $823,166 (6%)

🟨 7-Year Property: $25,124 (0.2%)

🟥 5-Year Property: $4,208,946 (31%)

Breakdown of Reclassified Assets

39-Year Property (Structure)

foundations, structural framing, roofing, load-bearing walls, electrical infrastructure, elevators, plumbing, fire protection, and central HVAC systems.

15-Year Property (Land Improvements)

parking lot and curbing, site lighting, signage, sidewalks, decorative fencing, and irrigation systems.

7-Year Property (Telecom & Special Equipment)

security system components, hotel communication systems, and in-room tech hardware.

5-Year Property (Short-Life Assets)

in-room furniture and fixtures, bathroom vanities and accessories, lobby and lounge carpeting, lighting, artwork, fitness equipment, business center items, and select back-office components.

Summary

By partnering with Cost Seg America, this hotel owner claimed over $5 million in first-year depreciation—more than 15x what straight-line depreciation would have allowed. Our team applied IRS Approach #2—the Detailed Engineering Cost Estimate Approach—to reclassify a substantial portion of the property into short-life assets, unlocking massive tax savings and powerful cash flow from day one. At a 37% tax rate, that equates to over $1.95 million in real tax savings—capital that can now be used to renovate, reinvest, or reduce liabilities across their portfolio.

With over 30 studies completed together, this hotel owner continues to rely on Cost Seg America because they value precision, consistency, and a relationship built on trust.

Cost segregation is a proven strategy used by the most sophisticated real estate investors to boost cash flow, scale faster, and reduce tax liability. If you own commercial or residential rental property and haven’t done a study yet, now is the time. We deliver audit-ready results that give you clarity, control, and confidence in your financial future.

Complimentary Proposal