STR Renovations: Request a Useful Contractor Breakdown
Turn bundled vacation-rental renovation invoices into a clearer study file with component descriptions, work locations, and a payment reconciliation.
Request facts, not a tax result
The contractor’s role is to explain the work actually performed. Ask for materials, quantities where available, installation descriptions, work locations, and labor detail. Do not ask a contractor to label everything five-year property or to produce a targeted deduction. The study provider uses construction facts and the tax preparer evaluates filing treatment. A factual breakdown is valuable even when it contains no tax terminology.
Separate the project into physical scopes
A backyard invoice might include a deck, freestanding furniture, equipment, lighting, and electrical work. An interior invoice might bundle paint, permanent cabinetry, removable appliances, and demolition. Identify the significant components and explain how they are installed. If a cost cannot reasonably be separated from contemporaneous records, mark it as bundled and discuss the costing method with the study provider rather than fabricating precision.
Reconcile payments to the final contract
Keep the original estimate, signed contract, changes, deposits, progress draws, credits, and final invoice together. A deposit is a payment toward the project, not an additional project on top of the final contract total. Ask the bookkeeper to reconcile vendor totals before the study team starts. Note owner-purchased materials separately and explain any credit for materials removed from the contractor’s scope.
A request you can send to the contractor
Please provide the final scope by work area, including the major materials or equipment, installation labor if available, approved changes, owner-supplied items, credits, and completion dates. Please identify which work supports the building and which serves specific equipment or another use. We are organizing the property records and are asking for factual construction detail, not a tax classification or valuation.
Use photos to explain attachment and location
Label photographs by room or site area and connect them to the invoice line or project identifier. Capture relevant details before walls are closed where those photos already exist; do not create evidence of work you did not observe. A wide shot can show context and a close view can explain attachment. Photos support the description but do not replace the cost records.
Agree on the unresolved items
Create a short list of bundled costs, missing invoices, uncertain completion dates, and components that cannot be observed. Have the provider state how those gaps affect the study’s assumptions and scope. The IRS cost segregation audit guide discusses study quality and documentation, but it is examiner guidance rather than an IRS approval of a particular report. Keep the final contractor file with the report for future questions.
Download the improvement reconciliation template. Blank organizing worksheet; no login required.
Technical reference: IRS cost segregation audit techniques guide. Templates and examples are organizational aids, not tax conclusions.