Cost Segregation for Avalon and Stone Harbor, New Jersey Rentals

Two boroughs, one island, mostly single-family houses

Seven Mile Island is a barrier island in Cape May County with two boroughs on it: Avalon to the north and Stone Harbor to the south. Both draw Philadelphia and New York drive-to families, and both are known for large single-family beach houses on high-value lots, rented by the week in summer. Stone Harbor also holds the Stone Harbor Bird Sanctuary. Wildwood, farther south, is a different animal, covered on the Wildwood page, and Cape May city sits at the county's tip, covered on the Cape May County page.

A shore house may be elevated or rebuilt, and a study classifies what is physically in the building today, not the building's history. The comparison with an island further north, where docks and dune walkovers define the site work, is on the Long Beach Island page.

5-Year7-Year15-Year27.5/39-Year Shell

1. 1Carpet and flooring
2. 2Cabinets and appliances
3. 3Curtains
4. 4Lamps and light fixtures

1. 1Bedroom furniture
2. 2Sofa and armchairs
3. 3Coffee table
4. 4Dining table and chairs

1. 1Driveway and walkway
2. 2Fencing
3. 3Landscaping
4. 4Deck

1. 1Roof
2. 2Exterior and load-bearing walls
3. 3Foundation
4. 4Central HVAC

5-Year: carpet and flooring, cabinets, appliances, light fixtures, curtains

7-Year: furniture

15-Year: driveway, fencing, landscaping, deck

27.5/39-Year Shell: roof, load-bearing walls, foundation, central HVAC

What the assessor's records say about land and building

New Jersey's Division of Taxation publishes the MOD-IV assessment file, with a land value and an improvement value for every parcel. For tax year 2026, on property class 2 (one-to-four family homes and condominium units), the median building share of assessed value looks like this:

In Stone Harbor, nearly four dollars of every five in a typical assessed parcel sit in the land. The method: improvement value divided by land plus improvement value for each parcel, then the median per borough, with zero-value records dropped. Borough codes (0501 Avalon, 0510 Stone Harbor) come from the Division's MOD-IV layout document. County-wide detail is on the New Jersey land-to-improvement data note.

A hypothetical, deduction only: take a round $2,000,000 purchase. At Stone Harbor's 21.4%, building value is $428,000, and the estimator rule on the calculator page (16% to 26% of building value for a short-term rental) gives an estimated first-year deduction of $68,480 to $111,280. At Avalon's 29.7%, building value is $594,000 and the rule gives $95,040 to $154,440. An 80/20 rule of thumb applied to the same price would start from $1,600,000 of building, which is why land comes out first. The assessor's split is a sanity check, not an allocation, since assessments follow each borough's revaluation cycle and an engineered study allocates from the actual purchase price. See how land and building basis interact.

What each borough's own pages say about renting

Both boroughs license rentals, and both tie the license to a fire inspection. From their own pages:

• Avalon: the borough's rental license page states that every property containing rental units must register, submit to inspection, and be licensed in order to rent or lease, as an annual registration and fee. The application is online, asks for proof of at least $500,000 in liability insurance, and requires a full-time Cape May County resident or a business or realtor as property manager.
• Stone Harbor: the Fire Prevention Bureau page posts a rental license and a fire inspection fee for each rental, $200 and $100 for a single-family house, and notes that a Cape May County representative must hold a key for the inspector.

These are operating rules. They do not change what depreciates or on which schedule, and the fee figures are as posted when this page was written.

Occupancy tax: Stone Harbor has one, and the state sets the baseline

The Division of Taxation's Municipal Occupancy Tax List, dated October 5, 2026, shows Stone Harbor Borough at 3% on both hotel and motel stays and transient accommodations, effective June 1, 2026. Avalon does not appear on that list. Separately, the Division's bulletin TB-81R sets a 6.625% sales tax and a 5% state occupancy fee on a transient accommodation booked through a marketplace or run as a professionally managed unit, and it carves out certain rentals handled end to end by a licensed real estate firm. The bulletin is dated February 2022.

These lines ride on the renter's bill. They sit outside income tax and outside depreciation, so they matter for pricing and bookkeeping, not for which components reclassify.

Weekly summers, local managers, and the 7-day test

Weekly summer rentals on the island run Saturday to Saturday, and a season of 7-night stays averages to a 7-day stay, right at the line in Reg. 1.469-1T(e)(3)(ii). Shoulder-season weekends pull the average down, and the 7-day rule page shows how it is computed from booking records.

Avalon's local-manager requirement matters for the next test. Clearing the 7-day line only opens the door to material participation: 500 hours, substantially all the participation, or 100 hours and more than any other individual. Hours put in by whoever fills the required manager role count in that comparison, a dynamic covered on the property manager page. A house the family also uses should keep the 14-day personal-use line in view, covered on the personal-use page.

What reclassifies in a large shore house

A big single-family house carries more reclassifiable components than a small unit: a full interior finish package, and a long list of site items.

• 5-year: cabinetry, appliances, carpet and most flooring, decorative lighting
• 15-year land improvements: decking, driveways, fencing, exterior lighting, outdoor showers, pools and bulkheads where present
• Stays on the long schedule: framing, roof, foundation or pilings, central HVAC

Every study is custom-priced and works from listing photos with no site visit, with turnaround normally 1 to 2 weeks for a residential rental and 2 to 3 weeks during tax season. For a house owned for years, a look-back study catches up missed depreciation through Form 3115. Basis guarantees at least 30 times the fee in first-year deductions on a short-term rental, or that study is free. The 60-second qualifier at /qualify models a specific property before any commitment.

Frequently asked questions

Are Avalon and Stone Harbor in the same county?

Yes. Both boroughs sit on Seven Mile Island in Cape May County, New Jersey, so they share a county but have their own assessor records, license rules, and occupancy tax status.

Why is the building share of assessed value so low in Stone Harbor?

The assessor's land value on a shore lot is large relative to the structure on it. The 2026 median building share of assessed value is 21.4% in Stone Harbor and 29.7% in Avalon, against 43.8% for Cape May County, and only the building portion depreciates.

Does Avalon charge a municipal occupancy tax?

Avalon does not appear on the Division of Taxation's Municipal Occupancy Tax List dated October 5, 2026. Stone Harbor does, at 3% effective June 1, 2026. Check the Division and the borough for current rules before relying on either.

Does a rental license change how a shore house depreciates?

No. A license and a fire inspection are local rules about operating a rental. Depreciation runs on federal rules, and the license affects compliance and bookkeeping, not which components reclassify.

Does an Avalon or Stone Harbor house need a site visit for a study?

No. Short-term rental studies work from the listing photos already posted for guests, so there is no scheduled visit and no owner homework list.