Maui County's post-Lahaina STR phase-out plans materially affect West Maui cost-seg hold-period modeling. Engine-derived walkthrough of STR-operating vs LTR-forced-conversion scenarios for a Kaanapali condo.
Before the analysis: the underlying numbers this post draws on come from 5 Maui-area properties run through the Cost Seg Smart engine, same engine that produces real customer studies. Median Year-1 federal savings is $62,694 at the 37% top marginal bracket with 100% bonus depreciation. Reclassification ratio ranges 17.2% to 27.4%.
Honest framing first: Maui is the highest-regulatory-risk market in the Cost Seg Smart network as of 2026. Following the August 2023 Lahaina fires that destroyed much of West Maui, Maui County has announced an active short-term-rental phase-out plan targeting thousands of West Maui condo units (Kaanapali, Lahaina, parts of Honokowai), properties operating as STR for years would be required to convert to long-term-rental use, with phase-out timelines published by the county. For STR-intent investors, this means the §469 short-term-rental loophole that has historically supported Maui STR cost-seg strategies is at material risk for West Maui properties in particular. Buyers should consult...
The remainder of this section drills into the specifics that matter for regulatory specific. The five fixtures we ran through the engine for Maui span $925,000 to $1,850,000 in purchase price across 5 distinct sub-markets, enough variance to draw real conclusions about which scenarios actually produce cost-seg ROI in this market.
Take the Kaanapali Condo (regulatory-risk flagged) as our anchor example. Purchase price: $1,485,000. Built 2002, 1450 sqft, CONDO operating as a short-term rental, located in West Maui (Kaanapali / Lahaina area).
The engine determined land allocation of 44.5% using statistical methodology, producing a depreciable basis of $823,432. Of that, the engine reclassified $163,500 into 5-year personal property (FF&E, decorative finishes, certain electrical), $53,324 into 15-year land improvements (paving, landscaping, hardscape, site lighting), and the rest into the 27.5-Year Residential Real Property structural category.
That produces a total reclassification ratio of 26.9%. At 100% bonus depreciation and a 37% federal marginal bracket, the illustrative Year-1 federal tax savings is $81,951. That's the headline number for this fixture.
Contrast that with Wailea Resort Condo: $1,850,000 in South Maui (Wailea / Kihei), built 2008. Here the engine produced a reclassification ratio of 26.4%, lower than the previous example.
Why? Two reasons. First, the land allocation profile is different, 43.5% here versus 44.5% for the previous example. Second, the engine's treatment of condo as a furnished short-term rental interacts with the build-year and FF&E density differently across neighborhoods.
The takeaway: in Maui, the per-fixture variance is real. A median number (26.6% reclass) hides meaningful variation across sub-markets and property archetypes.
Hawaii partially decouples from federal §168(k), HI requires addbacks for federal bonus depreciation with recovery on the regular MACRS schedule for state purposes. Combined with Hawaii's top 11% state rate, the state-side timing mismatch on cost-seg acceleration is meaningful. The federal §168(k) acceleration is unaffected; the HI-side reconciliation defers state benefit over the regular MACRS schedule.
Decoupling: Hawaii has periodically modified bonus depreciation conformity. Verify current-year treatment with your CPA.
This affects every cost-seg calculation in Maui. Because Hawaii doesn't fully conform, the federal Year-1 figure shown above is only the federal-only portion. The state benefit is smaller (or different) and your CPA will need to manage the addback at filing time.
CRITICAL REGULATORY CONTEXT: Following the August 2023 Lahaina fires, Maui County has announced an active short-term-rental phase-out plan targeting thousands of West Maui condo and SFR units historically operated as STR. The phase-out timeline and scope have evolved through 2024–2026 and remain subject to ongoing review. Properties in West Maui (Kaanapali, Lahaina, parts of Honokowai) face the highest phase-out risk. South Maui (Wailea, Kihei) is subject to existing county STR ordinance with potential phase-out review. Upcountry (Kula, Makawao), East Maui (Hana), and North Shore (Paia, Haiku) have lower phase-out exposure. STR-intent buyers must verify current ordinance status and phase-out applicability before underwriting any STR-revenue assumption. Material participation under §469 requires the standard tests, but hold-period assumptions in Maui must account for the regulatory-phase-out scenario where STR operation is forced to convert to LTR.
To run this analysis for your specific Maui property: the same engine, with your address, year built, square footage, and renovation history. Studies start at $495 for residential under $300K. Audit defense is included with every Cost Seg Smart study.
If you operate this property as a short-term rental and want to offset W-2 income, the 7-day-rule + material-participation pathway has its own rule layer at costsegw2.com.
To run this analysis for your specific Maui property: the same engine, with your address, year built, square footage, and renovation history. Studies start at $495 for residential under $300K. Audit defense is included with every Cost Seg Smart study.
If you operate this property as a short-term rental and want to offset W-2 income, the 7-day-rule + material-participation pathway has its own rule layer at costsegw2.com.